A Guide to Income Protection Insurance (Australia)
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What is income protection?
If you suffer a sickness or an accident and are unable to work for longer than the waiting period, an income protection policy typically pays you a monthly benefit of up to 70% of your regular income. These benefits will be paid to you until you no longer meet the eligibility requirements of your claim, or you’ve reached the maximum benefit period outlined in your policy documents.
How does income protection insurance work?
Typically, each income protection policy will vary depending on the definitions and conditions of your specific policy. However, there are a few things to understand about this type of cover before you put cover in place.
How much does income protection pay?
Most income protection policies cover up to 70% of your pre-disablement income if you are unable to work due to illness or an injury for longer than the waiting period. The amount of cover which you may require will typically depend on your personal circumstances.
What is a waiting period?
Income protection waiting periods are the amount of time that you’ll generally need to wait before you’ll be able to claim your benefits. It’s important to note that opting for shorter waiting periods generally means you’ll pay a higher premium for your cover.
What is a benefit period?
The benefit period refers to the amount of time for which the insurer will pay the monthly benefit should you be unable to work. This period directly impacts your premium. Longer benefit periods are often more expensive than shorter benefit periods.
When are you eligible to claim?
Generally, if you’d like to make a claim on your income protection, you’ll need to be unable due to illness or injury. For new policies, you’ll generally need to be unable to perform the important income-producing duties of suitable work in your regular occupation. After 24 months on claim, most policies change the definition to any occupation. Note that some legacy policies may carry an Own Occupation definition, but this is no longer available on new policies issued after October 2021.
What does income protection insurance cover?
Most income protection policies are designed to replace up to 70% of your income based on your annual earnings in the 12 months prior to your injury or illness. The benefits that you receive can be used to cover your living expenses, pay for debts or your childrens school fees.
What’s usually not covered?
It’s important to note that most income protecion policies have specific exclusions which apply. Depending on which insurer you have cover with, your cover may exclude sickness and accidents directly or indirectly resulting from:
Any conditions or situations specifically excluded in your policy:
- Injuries you intentionally cause to yourself, including suicide attempts
- War or acts of war
- Normal pregnancy or childbirth without complications
- Injuries or illness that occur while committing or attempting a crime
- Elective (non-essential) surgery within the first 6 months of your policy starting or being restarted
- Any period where you’re in prison, a correctional facility, or on remand
Do you need income protection?
Often, your ability to earn an income is your biggest asset. If your income was no longer available, income protection may be able to reduce the financial burden of lost income.
You may need it if:
- Your income pays for your daily expenses
- There are any existing debts you need to pay
- You have a mortgage
- Your family is financially dependent on you
- You are self-employed
You may not need it if:
- You have significant savings in place
- You have strong cover through your Super or employer
Is income protection insurance worth it?
Deciding whether income protection is worth it for you will generally depend on your personal circumstances. However, an income protection policy can bring you valuable peace of mind knowing that you and your loved ones are taken care of even if you can’t work. Ultimately, the cost of a monthly premium may be worth considering if it helps ease the financial strain of losing your income for an extended period.
How much does income protection cost in Australia?
Income protection in Australia costs between $25.78 and $39.92 for a $2,800 monthly benefit with a 30-day waiting period and a 2-year benefit period if you’re a 40-year-old male non-smoker who lives in NSW*. The same policy for a 50-year-old male would cost between $39.08 and $71.56 depending on the insurer.
Typically, several factors impact the cost of your cover. Compare policies from a variety of insurers to find the right cover for your circumstances.
*Source: Life Insurance Direct Comparison Engine (April 2026) Premium estimates are based on a 2-year benefit period, 30-day waiting period, for a non-smoking 40-year-old male living in NSW earning $48,000 per year.
What affects the cost?
Typically there are several factors that influence the premium for this type of protection. These include:
- Monthly benefit: Higher cover amounts mean higher premiums.
- Benefit period: Longer payout periods (e.g. up to age 65 or 70) cost more.
- Waiting period: Shorter waiting periods increase premiums.
- Policy type: Indemnity and (previously) agreed value policies are priced differently.
- Premium structure: Age-stepped, level, or hybrid premiums affect long-term cost.
- Optional extras: Adding features such as a Superannuation Contribution Option or an Increasing Claims Option can increase premiums.
- Occupation: Higher-risk jobs typically result in higher premiums.
- Age, gender, and location: Personal factors can influence pricing.
- Smoking status: Smokers generally pay more than non-smokers.
- Health and lifestyle: Poor health or risky activities can increase costs or add exclusions.
- Health programs: Some insurers offer discounts for maintaining a healthy lifestyle.
Is income protection tax deductible?
Yes, generally your income protection premium is tax-deductible if it’s held in your name. This type of cover protects your salary and provides you with an income if you’re unable to work due to illness or injury. How much you’ll be able to claim for will usually depend on your marginal tax rate and the cost of the premium. When you receive your monthly benefit on this type of cover, you’ll typically need to declare it as taxable income.
Income protection inside vs outside super
When purchasing an income protection policy, you typically have the option to pay for your premiums personally or through Super. Benefits paid through super are typically taxed before being released to you, and payment is subject to the super fund meeting superannuation conditions of release, which can add complexity to the claims process.
Each has its own set of pros and cons which you should consider before deciding which is right for you. These include:
| Feature | Inside Super | Outside Super |
|---|---|---|
| Cost | Paid from super | Paid personally |
| Flexibility | Limited | More flexible |
| Claims | More complex | Simpler |
| Super impact | Reduces retirement savings | No impact |
| Benefit options | Usually shorter | More options |
How much income protection cover do you need?
The amount of cover that’s right for you will typically depend on several factors. It might be a good idea to set up a budget so that you have an indication of your monthly expenses and how much income you’ll need to replace if you aren’t able to work.
How to compare income protection policies in Australia
Generally, the best income protection policy for you meets your unique requirements. To find a policy that may meet your requirements, comparing policies from several different insurers is a good idea. Consider looking at the following:
- Claim eligibility criteria: including the disablement definition applicable to your policy (suitable occupation for new policies; Own Occupation on some legacy policies), and the Pre-Disablement Income Definition.
- Monthly benefits: Policies typically cover up to 70% of your pre-disability income (previously 75% in some cases)
- Pre-disablement income period: Understand how your income is calculated for claims, for example, averaged over the last 12 or 24 months. This can significantly affect the benefit paid.
- Premiums: Determine whether premiums are variable age-stepped, variable, or hybrid. Each option affects how your premiums change over time.
- Waiting period: The length of time you need to wait before benefit payments begin. Common options include 30, 60, or 90 days.
- Benefit periods: The maximum length of time you can receive payments, such as 2 years, 5 years, or up to age 65.
- Other built-in benefits: Check for features like indexation, rehabilitation support, and partial disability benefits that are automatically included.
- Exclusions on the policy: Review what’s not covered under the policy, such as pre-existing conditions or injuries resulting from criminal activity.
How to get income protection insurance
To apply for cover, there are generally a few easy steps you can take. Firstly, you’ll need to request an income protection quote below. We compare policies from up to 9 leading life insurance brands. Once you’ve found an option that matches your requirements, one of our specialists will help you apply for cover over the phone.
Frequently Asked Questions and Answers
Do you pay tax on income protection payments?
Generally, yes. If you make a claim and receive a monthly benefit payment, you’ll generally need to declare those payments as part of your taxable income. However, the premiums you pay are typically tax-deductible if the policy is held in your name.How much does income protection cost?
The cost of your income protection cover will typically depend on several factors. This includes your age, gender, where you live, your smoking status, your policy features and benefits, premium types and frequency as well as any discounts which you may be eligible for. Compare your options to see how much you might pay.Why does income protection only cover 70%?
Typically, most income protection plans will only cover up to 70% of your income to keep your premiums more manageable over time. The cap is also in place to help you retain an incentive to return to work instead of staying on claim for longer than it takes you to recover.Can self-employed people get income protection insurance?
Yes, if you’re self-employed, you’ll generally be able to buy an income protection policy. However, you’ll generally need to meet certain eligibility requirements before you can apply. Insurers typically look at how you work, how your income is earned, and the level of risk associated with your occupation before offering cover.Does income protection cover pre-existing conditions?
It depends on the insurer and the specific condition. Insurers assess pre-existing conditions individually at application time and may choose to cover them, apply an exclusion, or add a premium loading. It’s important to disclose all pre-existing conditions when you apply so the insurer can confirm what they will and won’t cover.
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