Wage Insurance in Australia

After wage insurance? Find the right cover for you.

What would you do if you fell sick with a serious illness and had to take a few months off work? Would you be able to provide for your family if you didn’t have a steady stream of income to help pay for regular expenses like your mortgage, bills and even groceries?

What's the benefit of wage insurance?

Wage insurance can help you stay on top of your finances if you’re unable to work due to an injury or an illness. Wage insurance can provide:

  • Ongoing payment to replace your income. You are provided with up to 75% of your original income while you cannot work.
  • Rehabilitation benefits. Some wage insurance policies give you an option to
  • Tax deduction benefits. The payments you make for your policy can be deducted as an expense at tax time.

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Compare income protection quotes from these direct brands

Product details Maximum cover Maximum Entry Age Cooling-off
Income Protection
Income Protection
Cover up to 85% of your income up to $10,000 per month if you can't work due to sickness or injury. Cover for over 1,000 jobs and full-time, part-time and self-employed. $10,000 60 30 Get quoteMore info
NobleOak Income Protection
NobleOak Income Protection
Receive up to 75% of your income each month to a maximum of $20,000 if you can't work due to serious illness or injury. $25,000 59 30 Get quoteMore info
Income Protection
Income Protection
Receive up to 75% of you income (up to $10,000 per month) of your income if you're unable to work due to serious illness or injury. $10,000 59 21 Get quoteMore info
Ezicover Income Protection
Ezicover Income Protection
Cover up to $12,000 income replacement when unable to work in any occupation due to sickness or injury. First month of cover is free. $12,000 60 30 Get quoteMore info

What is wage insurance?

As the name suggests, wage insurance offers protection for you and your family if you are unable to work. Wage protection insures you for a predetermined level of your income, usually 75 per cent of your salary, and will pay that amount for the period of time that injury or illness keep you out of the workforce.

Who should consider wage insurance?

Wage insurance is worth considering for anyone who relies on their income to pay their bills and look after regular expenses. It can be especially important for the self-employed, small business owners, and anyone whose business relies on their capacity to work.

Some companies also offer wage insurance cover for part-time workers, and because many part-time workers are wives and mothers who have been forced to return to work in order to provide for their families, wage insurance can be essential in making sure the bills are paid.

Wage insurance is also recognised under a number of different titles including:

Essentially, wage insurance lets you focus on getting back to full health, rather than having to worry about managing your finances.

Is wage insurance necessary if I am covered under workers compensation scheme?

Some people believe that they will not need wage insurance because they are covered against workplace injury by WorkCover. However, what they don’t realise is that WorkCover is only a minimal cover that insures you against injuries suffered at work, while wage insurance covers roughly 75 per cent of your salary and you don’t need to have been injured at work to receive cover.

In addition, the Australian government announced changes to WorkCover in July 2012 that made wage protection insurance more important than ever. The changes mean medical benefits for injured workers are capped after just one year, while a five-year cut-off time now applies to weekly benefit payments. The changes also mean that weekly benefits are reduced after 13 weeks, whereas previously workers were 100% covered for 26 weeks.

Will I be covered under wage insurance if I become unemployed?

Unlike wage insurance policies in some other countries around the world, wage cover in Australia generally does not provide a benefit payment to policyholders if they are made redundant. This type of insurance is designed to cover you if you’re forced out of work through injury or illness, not if you lose your job.

Redundancy insurance can be offered as an additional benefit with mortgage insurance policies, which are designed to help with your mortgage payments in the unfortunate event of sickness or accident. Another option to consider is to create an emergency fund of perhaps three months of your salary in order to provide your own redundancy cover.

What you need to know about redundancy insurance

How is wage protection insurance different to other types of life insurance?

The ability to produce a steady stream of income is your most valuable asset. Unlike other types of life insurance, which provide cover for things like death and permanent disablement, wage insurance helps you manage your regular expenses so you can stay on top of things financially if illness or injury forces you out of work.

Life Insurance and Wage Insurance

DifferencesLife InsuranceWage Insurance
PurposeTo clear debts and provide financial support to dependents following the policyholder’s death.To cover debts and regular expenses while the insured is out of work due to injury or illness.
BenefitA lump sum paid upon death or diagnosis of terminal illness.Paid as an ongoing benefit, usually monthly, and typically covering 75% of regular income

It’s important to note that wage insurance can be used as a supplementary cover to life insurance to help make sure you’re covered for a variety of situations.

TPD (Total and Permanent Disablement) Insurance and Wage Insurance

DifferencesTPD InsuranceWage Insurance
PurposeTo support you and your family if you become totally and permanently disabled, resulting in a permanent inability to work.To cover debts and regular expenses while the insured is out of work for a period of time due to injury or illness.
BenefitA lump sum payment to help cover rehabilitation costs, repay debts and cover the cost of living.Paid as an ongoing benefit, usually monthly, and typically covering 75% of regular income.

Trauma Insurance and Wage Insurance

DifferencesTrauma InsuranceWage Insurance
PurposeTo support you and your family if you suffer a life-threatening medical trauma, eg heart attack, stroke or cancerTo cover debts and regular expenses while the insured is out of work due to injury or illness.
BenefitPaid in a tax-free lump sum to help repay debts, cover medical bills, and even take time off work to assist in recovery.Paid as an ongoing benefit, usually monthly, and typically covering 75% of regular income.

What are the key benefits and features of wage protection?

  • Total disability benefit. Wage insurance pays a monthly benefit if you suffer a loss of income because you are unable to work due to disability. This benefit will start to accrue as soon as the waiting period has ended.
  • Partial disability benefit. Wage insurance policies will cover you if, due to illness or injury, you are only able to work in a reduced capacity and therefore suffer a reduction of income. The amount paid will be influenced by your normal income, your monthly income for the month for which you’re claiming partial disability, and your monthly benefit.
  • Recurrent disablement. If policy holder suffers the same or a related disablement within a set period after first making a disability claim, the waiting period will be waived and the claim will be treated as a continuation of the prior disablement.
  • Death benefit. If the person insured dies, wage protection insurance policies will pay out a lump sum to help the insured person’s family cover expenses. This can help your family stay on top of things financially as they cope with your death.
  • Rehabilitation benefit. Wage insurance policies will pay a benefit if you are totally or partially disabled and, during that period, are participating in an approved vocational rehabilitation program. However, medical costs and treatment costs such as physiotherapy, will instead be covered by your regular health insurer.
  • Claims escalation option. This option ensures that the amount insured will automatically increase each year to keep pace with inflation. As your income from your employer is going to increase each year thanks to inflation, this ensures your change in income will be reflected in your policy.
  • Other benefits. A range of other optional benefits can also be included in your wage protection insurance policy, so make sure you get the right cover to suit your individual needs.

How much does wage protection cover cost?

Several factors influence how much your wage insurance policy will cost. These include:

  • Your age
  • Your gender
  • Your lifestyle habits, for example smoking
  • Your occupation. Some jobs carry a higher risk of injury than others
  • The waiting period. This is the period of time you must be not working before your cover will begin. You need to ask yourself how long you and your family can survive financially without being paid. The shorter the waiting period, the higher the premiums.
  • The benefit period. Wage protection policies will only pay you a benefit for a certain period of time, and you need to choose how long that will be.
  • Extras and added options.

How to claim tax deduction on your wage protection insurance

How is wage insurance treated when it comes to tax?

Wage insurance also needs to be taken into consideration when you’re filing your tax return, as this type of insurance is a tax-deductible expense. You can claim the cost of your premiums against the loss of your income, but you must also include any benefit payment you receive under a wage insurance policy on your tax return.

Learn more about salary continuance insurance

Wage protection insurance through superannuation: pros and cons

Many superannuation funds offer the option of including wage insurance through your super account. When considering this wage insurance option, it’s important to examine the advantages and disadvantages of getting income protection through your super fund.

  • Security. When you make a claim, you’re not just one person up against a big insurance company; you have the super fund to manage your claim.
  • Premiums are deducted from your super account. You won’t notice any short-term effect on your hip pocket.
  • Can work out cheaper. It may be cheaper because super funds sometimes purchase insurance policies in bulk.
  • The types of cover and the level of cover available is limited. Wage protection through superannuation often offers only a minimal level of cover, with little scope to tailor the policy to your specific needs
  • Your wage protection insurance may cease if you change jobs and super providers. If you have more than one super fund in your name, you could be paying multiple times for the same type of insurance.
  • Premiums are not tax deductible. Standalone wage insurance on the other hand, is tax deductible.
  • There may be delays in the payment of some benefits. Payments go to the super fund's trustee first before being distributed to you.

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William Eve

Will is a personal finance writer for finder.com.au specialising in content on insurance. While he cannot give personal advice to clients, Will enjoys explaining the intricacies of different types of protective cover to help individuals and businesses find affordable cover that won't leave them underinsured.

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