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Is income protection worth it for students?

If you work, you need to consider income protection for students.

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As a student, you probably aren't thinking much about protecting your income. But what would you do if you suddenly couldn't work because of an illness or injury? Would you be able to support yourself? Would your ability to continue studying be impacted? How would you get by? Income protection might not be top of your list of priorities, but it's an important consideration if you work and study. Here's why.

Should students consider income protection?

If you have to work to support yourself through study, then you should seriously consider income protection. If you become injured or ill, having some kind of income insurance could be the difference between continuing your studies or not. It can provide you with up to 75% of your monthly income, so you can focus on getting better, rather than how you'll pay your bills if you were suddenly unable to work.

Are there affordable income protection options for students?

✅ Yes. In most cases, the younger you get income protection insurance, the cheaper it's going to be. That's because you're less likely to have or develop any health conditions. Here are some ways you can get cheap income protection:

  • Go for level premiums. If you're young, make sure you take advantage of level premiums. These stay the same forever, meaning you'll be paying the same in your 50s as you were in your 20s and 30s.
  • Choose a longer waiting period. The waiting period is the time you need to wait before you start receiving income protection payments. The longer you're willing to wait, the cheaper your premiums will be. You usually have the choice of 30, 60 or 90 days.
  • Choose a shorter benefit period. The benefit period is essentially how long you want to be paid for. The shorter time you choose — say two years as opposed to five years — the less your insurance will cost.
  • Apply while you're young and healthy. If possible, taking advantage of cheap premiums offered to the young and healthy is a sure-fire way of paying less for insurance.
  • Income protection premiums are tax deductible. Don't forget about this come tax time. You can get some money back for what you've paid during the financial year.
  • Don't smoke, or give it up. If you can stop smoking for two years, you can be classed as a non-smoker, which will lower your premiums dramatically.
  • Compare. Comparing policies side-by-side is one of the best ways to find an affordable policy as you'll quickly learn some are much better than others.

Average monthly cost of income protection for students

We gathered 6 quotes from 9 providers in Australia for male and female non smokers based in NSW. These quotes were correct as of February 2022.

Average income protection rates for men

Amount Covered19-year-old20-year-old21-year-old22-year-old23-year-old24-year-old25-year-old
$1,000$15.26$15.27$15.28$15.29$15.29$15.31$15.35
$2,000$29.56$29.58$29.59$29.60$29.62$29.66$29.72
$3,000$44.03$44.05$44.06$44.09$44.11$44.17$44.26
$4,000$56.28$56.30$56.32$56.35$56.37$56.38$56.54

Average income protection rates for women

Amount Covered19-year-old20-year-old21-year-old22-year-old23-year-old24-year-old25-year-old
$100,000$19.48$19.51$19.52$19.52$19.53$19.53$19.55
$200,000$38.96$38.98$39.01$39.02$39.05$39.07$39.08
$500,000$57.97$58.01$58.04$58.06$58.18$58.13$58.15
$4,000$74.09$74.13$74.17$74.20$74.24$74.28$74.30

Compare income protection quotes to get an idea of cost

1 - 5 of 8
Name Product Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Average Claims Acceptance Rate Average Claim Time Sum Insured Apply
AAMI Income Protection
$10,000
75%
Up to
5 years
87.20%
2.1 months
$211 million
If you’re an existing AAMI customer, you can save 5% on income protection. New customers can get one month free by paying annually.
Insuranceline Income Protection
$10,000
75%
Up to
5 years
87.20%
2.1 months
$211 million
Get 12 months cover for the price of 11 months if you pay annually. T&Cs apply.
Suncorp Income Protection
$10,000
75%
Up to
5 years
87.20%
2.1 months
$211 million
Sign up and become a member of Suncorp Benefits. Access savings of up to 15% from major retailers. Existing members can get a 5% discount off their policy.
TAL Income Protection
$30,000
70%
Up to
Age 65
87.20%
2.1 months
$211 million
Get up to 70% of your income covered with flexible short and long term benefit periods.
NobleOak Disability Income Insurance
$30,000
70% for the first 24 months, 60% thereafter
Up to
Age 65
Data not available
Data not available
$59 million
With NobleOak, you can lock in a policy with a benefit period covering you up to the age of 65. Cover limits may go as high as $30,000.
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Pros and cons of income protection for students

Weighing up the advantages and disadvantages of income protection insurance may help you decide if it's worth it.

Pros

  • It's much cheaper to begin income protection when you're younger
  • If you only have a part-time salary, a small benefit amount will be more affordable
  • It's one less thing to stress over, knowing that you're sorted financially if you become ill or injured

Cons

  • It's an added expense when your finances are potentially stretched as is
  • You might not need it

What's the best income protection for students?

Here are a few income protection insurance options for students worth considering:

  • Super. When you open a super account, you automatically get life insurance added (the premiums come out of your super). You can sometimes change this to income protection, which may be a more affordable way to safeguard your finances. Keep in mind though that it often won't pay you as much as a standalone policy can (e.g. 75% of your monthly income).
  • Direct or retail. There are a couple of different ways that you buy insurance. Direct cover is when you purchase directly from an insurer, whereas retail is when you buy through an adviser or broker. Buying direct usually only requires a limited level of medical underwriting and is often cheaper, largely because it's not as thorough as a broker would be. If you're looking for affordability, direct may be your best option.

Bottom line

If you rely on your income to pay for the bills, whether that includes your tuition fees or not, then you need to consider income protection. Without it as a backup, you put your education at risk. You might never need it, but with all the stresses of maintaining a job while studying, it's nice to know there's one thing you can sort out now.

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