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.
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.
This benefit can help you cope with ongoing expenses, so you can focus on recovering and getting back to work.
We have put together a step-by-step guide to help you find affordable income protection in Australia:
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.
Source: Australian Bureau of Statistics Earnings in All Jobs (updated May 2017)
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:
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.
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.
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.
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.
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.
Some things to consider when making an income protection insurance comparison and searching for the most competitive prices, include:
The higher your monthly benefit is, the more expensive your premiums will be.
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.
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.
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.
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:
You can enhance your policy with additional policy options to give yourself greater cover. These generally come with a higher premium.
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.
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.
Premiums tend to increase with age. Young people generally pay lesser in premiums because they are considered a lower health risk.
Generally, women tend to pay higher income protection premiums compared to men because women usually make more income protection claims.
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.
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.
Discover how you can protect your income when working for yourself. Income protection for self-employed Australians can help support you and your family.
Our experts have highlighted eight ways you can save on your income protection premiums, modifying your waiting period, removing CPI increases and quitting...
6 tax saving tips to consider before the end of the financial year; 30 June. Plus, 5 bonus tips to help you take action today and reduce your tax bill.
Understand how to qualify to be able to claim your premiums for income protection as a tax deduction. We explain what portion is deductible & how to claim.
TPD or Income Protection which is best or should I have both? Everything you need to know to protect your income and your family’s financial future.
Protect your small business and your family by taking out income protection, business expenses and keyperson insurance cover!
Questions & Responses
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???
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.
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!
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.
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.
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
Can income protection cover me for 24/7 anywhere anytime?
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.
Can I claim income protection at 61?
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.
I am 62 and drive Uber. I am in good health and am a non smoker and non drinker. I would like Income Protection.
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
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.
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.
I am over 65 years old and still working as a Contracted Engineer.
Can I still have income protection?
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.
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?
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.
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?
Thanks
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.