Income Protection Insurance

If you have a family or ongoing financial obligation, such as mortgage payments, rent, groceries or school fees, and rely on your salary to support you, then you might need income protection insurance.

Income protection is an insurance policy that will pay you a gross monthly benefit of up to 75% of your regular income, in the event you are unable to work due to sickness or injury for longer than your waiting period. This benefit payment continues until you reach your maximum benefit period or until you’re able to return to work.

This benefit can help you cope with ongoing expenses, so you can focus on recovering and getting back to work.

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Average future earning potential for Australians

Your income tends to grow as you mature and gain work experience, usually reaching its peak when you near retirement age. Imagine what would happen if you were unable to work because of an illness or injury while you’re still young.

Your ability to generate an income is generally your greatest asset. Unless you are independently wealthy, you need your income to pay your mortgage, repay debts, fund your retirement and maintain your current standard of living.

How your income increases as you age

Income protection earnings

Source: Australian Bureau of Statistics Earnings in All Jobs (updated May 2017)

What is income protection insurance?

Income protection in Australia is an insurance policy that pays a monthly benefit of up to 75% of your personal exertion income, after business expenses, if you can’t work for a period because of a sickness or accident. Your personal exertion income generally includes your salary, super contributions, commissions and bonuses, car and travel allowance.

Who should consider getting an income protection insurance policy?

If you have a family, are paying a mortgage and have other ongoing obligations and debts, then you should consider an income protection policy. This protects you in case you do not have enough funds during a long period of unemployment due to significant illness or accident. Being off work and unable to make these payments may put you and your family in a weak financial position.

People typically consider income protection insurance when:

  • Buying a house to help keep up with mortgage payments.
  • You have financial dependents (wife/husband, child, parent etc.).
  • You’re self-employed and generally won’t have sick leave to fall back on.
  • Having additional financial commitments that rely on your income, like a property portfolio.
  • Wanting to protect your ability to generate personal exertion income.

What is a benefit period and waiting period?

Benefit period

The maximum length of time you would like your monthly benefit paid to you should you not be able to work due to a sickness or accident. Depending on the insurer, you’ll generally have the choice of 2 years, 5 years, or up to your age 65 or 70. The longer your benefit period, the more expensive your premium will generally be.

Waiting period

The amount of time between becoming unable to work because of a sickness or accident and when you start accruing your monthly benefit. Waiting periods can range from 14, 30, 60, 90 or 180 days, 1 year or 2 years. The shorter your waiting period, the more expensive your premiums usually are.

Different types of income protection insurance

Indemnity Value

Indemnity Value covers you for a monthly benefit based on the lessor of your insured monthly benefit and 75% of your pre-disability income, that is the income you earned before the injury or sickness. Therefore, if your income has reduced since you took out your policy, your monthly benefit will be reduced to reflect the reduction in income. The pre-disability income is proved at claim time.

Indemnity Value is relatively cheaper compared to Agreed Value policies because your monthly benefit could be reduced with the reduction in your income at claim time.

Agreed Value

In Agreed Value policies, the monthly benefit or income you will receive at claim time is generally fixed and will not reduce with any future changes to your income.

Agreed Value, as the name suggests, is when the monthly benefit is agreed at application time and not at claim time. During application, your monthly benefit is calculated, based on pre-application income (your income before applying) and the monthly benefit is the agreed amount. You would need to provide proof of your income when you first apply for cover.

Guaranteed Agreed Value is the term some insurer’s use to validate that your financials are received and on file. This confirms your monthly benefit and thus the name guaranteed agreed value. However, some insurers still call it Agreed Value.

Important; With an Agreed Value policy, you have to provide full and complete financials at the time you apply for the policy.

Minimum working hours to be eligible for income protection cover

Generally, to be eligible for income protection, you must be working for a minimum of 20 hours per week in a Gainful Occupation.

If you do not meet the minimum working requirements, then feel free to contact our team and ask them to conduct a Pre-Assessment, to determine what options may be available to you from the panel of insurers we have access to.

Factors that affect your premiums

Some things to consider when making an income protection insurance comparison and searching for the most competitive prices, include:

1 Your monthly benefit

The higher your monthly benefit is, the more expensive your premiums will be.

2 Your choice of waiting period

Insurers generally offer you a selection of waiting periods – the time between becoming totally disabled and unable to work and when you start accruing your monthly benefit. Usually, it is anywhere between 14 days, one month, three months, six months to a year or two years.

Typically, your premiums tend to be higher when the waiting period is shorter because a claim can potentially be paid for less severe sicknesses or accidents. For example, a claim could be paid for a broken leg if you had a waiting period of 14 days but might not be paid if you had a 90-day waiting period because your leg might have healed by then.

3 Choice of benefit period

Flexible benefit periods options are available to suit your requirements and budget. The benefit period is the maximum amount of time you continue to receive your benefit payments, and it generally ranges from 2 years and 5 years or up your age 55, 65 or 70, depending on the insurer.

The longer your benefit period, the higher your premium will generally be, since you potentially get paid for a longer period and the insurer covers a higher risk.

4 Your occupation

The occupational hazards at work affect the cost of your premium. For example, a firefighter or policeman would pay more in premiums compared to someone who works on a grocery checkout or in an office. Generally, the riskier your job, the higher the premium will be.

5 Built-in benefits

Some policies might be more expensive because they include a broader range built-in benefits, while others might be cheaper because their offering is more basic. Examples of built-in benefits offered by select insurers include:

  • Specified injury benefit: Pays an advanced benefit before you’re waiting period ends when you suffer a particular specified injury.
  • Accommodation benefit: Reimburses accommodation expenses up to a certain amount, for you or a family member if you are confined to a bed and are either more than 100km from home or a family member is required to travel more than 100km to be with you.
  • Future insurability benefit: Increase your monthly benefit by up to 15%, but no greater than 75% of your income, without supplying additional medical information, when a significant life event occurs. The definition of a significant life event varies from insurer to insurer. For example, getting married or buying a new home (principal place of residence), increase in mortgage, the birth of a child or divorce. This benefit must be actioned within 30 days, and you need to provide evidence of the event.
  • Indexation: To help your policy keep up with inflation your level of cover increases either by the greater of CPI or a set percentage (3-5% depending on insurer) each year.
  • Three tier disablement definition: Depending on your income protection policy and insurer, your total disablement definition may provide you with a choice on how you want your claim to be assessed, this can be either:
    • Duties based: Unable to perform 1 or more important income-producing duties critical to the performance of your specific occupation.
    • Hours based: Unable to work at least 10 hours a week.
    • Income-based: Unable to earn at least 20% of your total income.
  • Recurrent disablement: If you return to work, and the same condition recurs within 6 months of returning to work, the insurer will generally treat it as a continuation of your original claim and recommence monthly benefit payments without you having to reserve the waiting period.
  • Needlestick: If you’re a medical professional as defined by the insurer, then up to a maximum of $1million may be payable if you suffer occupationally acquired Hepatitis B or C.
  • Interim cover: During the period between your application date and your policy being accepted, generally up to 90 days, the insurer pays a monthly benefit for up to 6 months should you become totally disabled solely as the result of an accident.

6 Optional extras

You can enhance your policy with additional policy options to give yourself greater cover. These generally come with a higher premium.

  • Lump sum benefit option: Certain insurers offer payment of your income protection benefit in a lump sum rather than as monthly instalments.
  • Trauma insurance benefit: A minimum benefit gets paid (usually 6 times your monthly benefit) if you suffer a critical illness as defined by your insurer’s PDS.
  • Bed confinement option: Receive 1/30th of your monthly benefit for each day you are confined to a bed during your waiting period.
  • Day 1 accident cover: Usually pays 1/30th of your monthly benefit during your waiting period if you suffer an accident and are totally disabled.

7 Choice of policy type

The type of policy you choose will generally affect your premiums. If you choose Agreed Value or Guaranteed Value policies, you pay typically around 20% more than if you chose an Indemnity Value policy.

8 Smoking Status

Smokers tend to pay more premiums because of the increased risk to their health. If you have not smoked for the last 12 months, you are generally described as a non-smoker for insurance purposes.

9 Your age

Premiums tend to increase with age. Young people generally pay lesser in premiums because they are considered a lower health risk.

10 Gender

Generally, women tend to pay higher income protection premiums compared to men because women usually make more income protection claims.

Is income protection insurance tax deductible?

Yes, income protection insurance is generally tax deductible in Australia because it protects your salary and gives you an income while you are unable to work because of an illness or injury. The amount you can claim back will be dependent on your marginal tax rate. However, you’ll have to pay tax on your monthly benefit because it is treated as an income replacement.

The premium you pay on income protection insurance is generally tax deductible. So, at the end of the year, you can claim 100% of this as an expense. However, you cannot claim a deduction for a premium or any part of a premium where the income protection policy is taken out through your superannuation and insurance premiums are deducted from your super fund. It would generally become a deductible expense to the Superfund, and not to you.

Important; Select policy options you’ve added to your income protection policy may not be tax deductible. If in doubt, be sure to contact your accountant or tax agent.

You can claim income protection premiums as a tax deduction when you lodge your tax return. Your life insurance company should inform you of the amount of premiums you have paid towards your income protection policy in a premium statement which is sent out in July of each year. If you do not have this document, make sure you contact your life insurer before you submit your tax return.

Published: January 3, 2019

Ask an Expert?


  • MARTIN |

    Can i take out a policy if i am Australian living and working overseas?

      Russell |

      Hi Martin

      Thank you for your question.

      If you are living and working overseas and have no intention of returning to Australia you are generally unable to take out any policy. However if it is your intention to return to Australia within the next 5 years, you can generally take out life insurance or trauma (critical illness) insurance. Income protection and TPD insurance will generally be more difficult to get and will be assessed on a case by case basis. It will also depend on where you are working and living and the type of work you are doing.

      Every situation is unique and if you would like more information I urge you to will in the quote form at the top of the page so we can speak with you to get more information about your specific situation.

  • Daniel |


    How many hours per week do I need to be working in order to be eligible for an income protection policy? I currently work 25 hours per week as a part time accountant.

      Russell |

      Hi Daniel

      Thank you for the question. Each insurer has its own view on the minimums required hours per week to be eligible for a policy. This generally ranges from 20 – 30 hours / week therefore it is important you explain your working hours to your insurance specialist before you take out a policy & they can then discuss the minimums for each particular insurer you may be interested in.

  • Jim Rasmusen |

    What is your age limit for income protection, I am 69 yrs old, working full time.

      Russell |

      Hi, great question.

      At age 69 you are no longer eligible for income protection insurance, however, you DO qualify for Living Expense Cover. This type of insurance is specially designed for individuals over 65, who want a monthly benefit should they become significantly disabled as a result of sickness or an accident.

      For more information please fill in a quote form or contact us on 1300 135 205 for an insurance specialist to explain your options.


      Russell Cain

  • Irene |

    My doctor has arranged for me an elective surgery in 2-3months time for my carpal tunnel surgery but I have an option not to go ahead with the procedure. Currently I am seeking physio therapy for treatment.

    I am a single parent with a mortgage and family expenses to meet. Am I able to sign up for Income protection in the event I agreed to proceed with the surgery? Will I be on a waiting period to cover the loss of income if I am unable to work whilst on sick leave?

    Thank you.

      Brett Lenertz |

      That is a great question Irene. Generally, the Life Insurance Companies will view this as a pre-existing condition and to comply with your Duty of Disclosure when completing the application / process you would be required to disclose your ‘carpal tunnel’ condition. The Life Insurer would want to know the severity of your condition and therefore they will assess the risk of covering you. The likely outcome would be an exclusion on your Income Protection Policy due to your recent diagnosis, however important for you to either contact us to complete a pre-assessment where we can find out how they will actually view it, or you may want to call around to other insurers yourself.

      Keep in mind, in the event of submitting a claim, the Insurer will obtain your Medicare history to check you fulfilled your duty of disclosure obligation of disclosing your full medical history which will show you have been treated for a ‘Carpal Tunnel’ condition.

      Waiting Periods do apply on most Income Protection Policies Irene, but do keep in mind that Income Protection can potentially cover you for a broad range of other sicknesses, accidents and injuries and if this was of interest to you, please don’t hesitate to contact our office to discuss this further or if you would like us to complete a Pre-Assessment for you as we specialise in assisting people with Pre-Existing Medical conditions.

  • Brian Brookes |

    If I have suffered with depression in the past year. Will this affect my premiums for income protection?

      Brett Lenertz |

      Thanks for your question Brian. When applying for an income protection policy, the insurer will ask question/s regarding mental health and therefore under your ‘Duty of Disclosure’ you would be required to advise the insurer of your depression. There are many options which could potentially occur here with applying for cover depending on the severity of your condition from a medical perspective and also if your depression has required you to take time off work in the past. Firstly, the insurer may decline your application altogether or they may offer you cover but specifically exclude your ability to claim benefits for a mental health event in the future. Secondly, the insurer could offer you cover but apply a loading to your premiums so that they will offer you cover but you will pay more than the rate they would have normally offered you based on normal application conditions. You are welcome to contact our offices on 1300 135 205 and one of our Life Insurance Specialists can take you through a pre-assessment so we can look at the potential cover that may be available to you. Remember, we compare up to 12 x Life Insurance Companies so we can look at various options if you would like to pursue an income protection policy.

  • Paul |

    Do you cover me and how much a year?

      Brett Lenertz |

      Hi Paul, There are many factors that go into setting up the correct type of Income Protection Policy for you. Please also remember that we compare up to 12 x Life Insurance Companies so you may wish to call our offices on 1300 135 205 and we can talk to you about the options available for you.

  • Amber |

    I’m looking for involuntary redundancy income protection. What are my options?

      Brett Lenertz |

      Hi Amber, There are some options available to you with regards to involuntary redundancy being a part of an income protection policy. However, it would be easier to speak to one of our Life Insurance Specialists on 1300 135 205 to gain an understanding around this along with the qualifying factors and any restrictions that may apply so you can best decide if this is suitable for you.

  • Eryn |

    How do I claim on income protection insurance? I have a policy with you guys I’m just not sure how to go about getting it.
    I have recently been unable to work due to a back injury.

      Brett Lenertz |

      Thanks for contacting us Eryn and we often get the question on how to claim on an income protection insurance policy; therefore we have provided this step by step guide to assist you. Secondly we offer a claims assistance service to our existing customers (I have just looked up your details and from the information provided I can see you are not an existing client of ours), and to new customers who would like to use our expertise in navigating the claims process which can be complex, alternatively you can contact your insurer directly and ask them how to claim on your income protection insurance policy as their process may differ slightly.

  • Rob |

    Hi Brett
    I was born with a heart defect that required my first surgery at the age of 16. Therefore I was already behind the 8-ball so to speak. I have spoken with income protection insurers in the past who will not cover me for cardiac related matters due to it being an existing condition. However, when questioned about whether I would like to be covered for other non related illnesses I was advised that I would have to pay a higher premium than normal due to the existing heart condition. My question is, if I do take out insurance to cover non cardiac related issues and surgery was concerned, my cardiac issues would come into play with requiring the input of a cardiologist during treatment. In fact, it would always require cardiologist input for any evasive procedure that may involve general anaesthetic. What is your company’s stance on that? Is this why we are paying a higher premium than others? Or will there be a clause somewhere that reduces income payments because part of the works will require pre-existing specialist input???

      Brett Lenertz |

      Thanks for contacting us Rob and for providing the details in regards to your situation. This is a great question to pose from an Insurance perspective and I thank you for taking the time to contact us as I am sure having Income Protection is very important to you.
      Firstly, as you mentioned the Insurers you have contacted will exclude Heart and Cardiac Related Conditions for you to claim on. This is simply known as an ‘exclusion’. The Insurer may exclude the Heart only or the entire Vascular System. This would have been advised potentially when you applied or were taken through the pre-assessment stage?
      Secondly, when you refer to higher premiums, this is known as a ‘loading’. A percentage is applied to your premium to cover the higher than average risk that a claim will occur.
      To bring all this information together, it is highly unlikely that an exclusion and a loading is applied at the same time on a policy as the Insurer is either excluding that area of the body to be claimed on or they are applying a loading to cover the potential higher risk of a claim. When a loading applies it generally will mean you are covered for all types of claims as you are paying more to have the policy.
      However, it is important to check that the Insurer does not have an over-riding pre-existing medical condition exclusion as may be the case with some providers and you should double check this with the Insurer you are considering applying with. The important consideration is to fully disclose and to provide these types of questions to the Underwriter at the Insurance Company. This process can be done by providing your medical file and as mentioned earlier undertaking a pre-assessment with the Life Insurance Company. You are most welcome to contact us on 1300 135 205 and talk to one of our Life Insurance Specialists who can contact the 11 x Insurance Providers we deal with and therefore can review your situation to find the best solution for your needs.

  • Julian |

    I took out Income Protection and was told I will be covered if I lost my job. I have lost my job and now I get told I’m only covered for sickness and injury!

      Brett Lenertz |

      Thanks for contacting us Julian and I am sorry to hear about your current situation. First of all I have checked if you are a client of ours and I have noticed that you are not but I can provide you with some general information. In the Income Protection Policies that we offer from the 11 x Insurance Providers that we deal with only 2 of them provide a form of involuntary redundancy cover. As you will see on the link there are restrictions involved as you must be a Loan Customer of both of the respective banks mentioned. Please have a look at our Income Protection and Redundancy page for more information. There may be Insurers out there that do offer these policies but in your situation you may have to go back to the Insurance Company if you were given the incorrect information.

  • Linda |

    Hi, we need to take out income protection but we don’t want multiple phone calls as this is an inconvenience and we always end up missing calls, not getting the same person when we call back, get different answers to questions.
    In short we don’t want phone calls, nor want to give a numbers to a large data base.

      Brett Lenertz |

      Hi Linda, totally understand. You are welcome to call our offices on 1300 135 205 and then we will allocate you to an specialist who you can have as your dedicated contact during the whole process. Thank You

  • Ben |

    Can income protection cover me for 24/7 anywhere anytime?

      Russell |

      Hi Ben

      Yes generally income protection covers you for any sickness or accident that keeps you off work for longer than the waiting period and covers you 24/7 at work or at home. Most policies provide world wide cover as well.

  • Dennis foley |

    Can I claim income protection at 61?

      Russell |

      Hi Dennis

      If you meet the definition of not being able to work due to a sickness or accident as outlined by your policy there should be no reason why your age of 61 would have any bearing on your ability to make a claim. However in saying that you need to ensure your cover / policy is still current as some policies expire at age 60, 65 or 70. If you need assistance in lodging a claim feel free to reach out to our claims team.

  • Peter |

    I am 62 and drive Uber. I am in good health and am a non smoker and non drinker. I would like Income Protection.

      Brett Lenertz |

      Thanks for making contact Peter. Is a great question you pose with the significant increase in people conducting this sort of work as their primary occupation or in many instances this can be a second occupation for many people. Currently, there is Income Protection available for Uber drivers but to be honest with you not all Insurers will offer cover but importantly with the gradual expansion of Uber, the Insurance Companies may change their view over time and be more accommodating. The best way forward is to make contact with one of our Income Protection Specialists on 1300 135 205 who can conduct a no obligation pre-assessment for you to consider. Thank You

  • AJ |

    I am a 65-year-old female living and working in WA. I am interested in TPD and Income Protection cover and would like a quote a soon as possible. Also please advise as to whether you have an office here in Perth.

      Anneke |

      Hello AJ,

      There are many factors to consider when determining Income Protection cover specific to your requirements. Because we want you to feel comfortable with your purchasing decision we provide side-by-side comparisons of policies from some of the top insurance companies in Australia.

      To enable us to do this for you kindly fill in the quote form above so you can conveniently compare benefits, features and premium prices. Similarly, you can compare TPD policies by filling in the relevant quote form.

      For immediate assistance please contact us on 1300 135 205 and a specialist will provide you with all the information you require.

      As per your question regarding our offices, we are situated in Suite 1, 271 Alfred Street North Sydney, but our online comparison service is available to all Australians.

  • WALTER |

    I am over 65 years old and still working as a Contracted Engineer.
    Can I still have income protection?

      Anneke |

      Hello Walter,

      Generally, the age at which income protection expires depends on your occupation. Blue Collar occupations will usually expire by age 65, while White Collar might continue until age 70.

      Please give us a call on 1300 135 205 so we can get a bit more clarity on your specific circumstances and requirements and see what options are available to you.

      Have a great day.

  • Rob |

    If you have a 30-day waiting period before getting paid after making a claim – how long would it really take to get your first payment?

      Anneke |

      Hey Rob.
      Excellent question. With an income protection waiting period of 30 days, you’ll generally only receive your first payment after day 60 because payments are made in arrears.

      For example, let’s say you get into an accident on the 1st of May 2018 and on the 5th your GP confirms you are not able to work for a period due to this accident. After 30 days, on June 4th, your benefit period starts. But because payments are made in arrears, you’ll only receive your first income protection payment on the 4th of July 2018, 60 days after your GP confirmed that you’re unable to work.

  • Jan Pam |

    I am currently claiming on my income protection insurance and am now in my 14th month.
    My insurance company did not automatically increase my benefit till I queried it.
    I have gone through the PDS and its states “Benefit Indexation* Your Insured Monthly Benefit will automatically increase each Policy year by the higher of the CPI Increase and 5%. You can opt out of indexation either on your application form or before a Policy Anniversary.”

    So, they have given me a 5% increase, however, I also have the claim escalation on my policy:
    “Claim Escalation benefit* Under an Income Protection Plan that is an Ordinary Plan, if your claim is paid for more than 12 consecutive months, we will increase your claim payments by the CPI Increase.”

    Am I right in thinking that my increase should be both the benefit indexation increase and claims escalation increase?

      Anneke |

      Hi Jan. Well done on querying your PDS.

      To clarify, the benefit indexation is the amount your cover increases by to stay in line with inflation and is only applied on a policy prior to making a claim and stops once you go on a claim.

      The claim escalation benefit refers to the amount your monthly benefit increases by each year on the anniversary of your claim, but please check your PDS for the exact date on which your benefit increases.

      So, now that you are on a claim, your monthly benefit should only increase by the claim escalation benefit, as the benefit indexation falls away as soon as your claim starts.

  • Michael Omm |

    I would like to terminate my income protection policy as the job I required it for has finished.
    Please contact me.

      Anneke |

      Hi Michael.

      We’ve checked on our system, using your name and email address, and it doesn’t seem that you are a client of ours. Please have a look at your policy documents and contact your insurer directly to cancel your policy. If, in the documents, it shows you are a LID client, please give us a call on 1300 135 205 with your policy number and we’ll assist you.

  • Charmaine Bowen |

    Hi, my name is Charmaine Bowen I have an account with Real life insurance and would like to close it down as I no longer want to continue. Please cancel my account.
    Charmaine Bowen

      Anneke |

      Hi Charmaine.

      We do not currently supply policies from Real Insurance. You’ll need to contact them (1300 377 325) directly to cancel your policy. Are you perhaps a Life Insurance Direct client as well?