Benefits of Income Protection

The biggest asset you have is not your house, your car or any investments. It is your ability to earn future income. When this ability is taken away, you not only lose your biggest asset, but you may also face significant financial and personal stress.

The main benefit of income cover is the ability to protect your income if you are unable work due to a sickness or an accident.

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  • Cover up 75% of Your Income
  • Tax Deductible Premiums
  • Flexible Waiting and Benefit Periods
  • Multiple Policy Options Available
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Protect up 75% of your income

Income Protection generally covers up to 75 per cent of your salary should you suffer from a sickness or accident and are unable to work. This monthly benefit can allow you to recover with the peace of mind knowing you are still receiving an income.

It generally provides flexibility to suit your circumstances and ongoing income requirements with your choice of waiting and benefit periods.

The monthly benefit can be put towards:

Day to day living expenses

Mortgage or rent expenses

Home modifications

Medical expenses

Cover for total and partial disablement

Total Disability Benefit:

You will generally receive 75% of your monthly salary if you suffer from a total disability as a result of a sickness or accident and you are unable to work for longer than your waiting period.

Partial disability benefit:

In addition to offering a benefit for total disability, insurers generally provide cover for partial disability. A partial disability benefit can provide you with a portion of your monthly benefit.

Select insurers may pay your partial benefit even if you are only disabled for a part of the month. In this case, they will pay 1/30th of your monthly benefit for each day of partial disablement.

Policy Flexibility

One of the great benefits of the income protection policies we compare is that they offer a number of flexible policy options:

Waiting Periods:

Insurers generally offer a number of Waiting Period options so you can choose one which suits your needs. General waiting periods may be 14 days, 30 days, 60 days, 90 days, 1 year or 2 years.

Benefit Periods:

A number of benefit periods will generally be available for you to choose from. These may be 2 or 5 years or to age 60, 65 or 70.

Policy Types:

Generally two types of income protection policies are available:

Locks in your income or monthly benefit at the time of your policy application if you have provided financial evidence, protecting you against any fluctuations in your income.

Income is not locked in at the time of your application and proof will be required when you claim. Indemnity policies are generally cheaper than Agreed Value policies.

Premium Types:

Insurers generally offer three premium types:

Level Premiums

Do not increase each year due a change in your age.

Stepped Premiums

Start off cheaper than level premiums but increase each year due a change in your age.

Hybrid Premiums

Starts off on a stepped premium structure but converts to a level style premium.

Built-in Benefits:

Built-in benefits offered by select insurers:

The Income Protection policies we compare generally provide a number of built in benefits designed to enhance your policy:

Specified Injury Benefit
Pays a one off benefit above your monthly benefit if you suffer from a specific injury such as a fracture, total and permanent loss of a limb or the loss of sight in one eye.

Accommodation benefit
Pays for accommodation expenses for your family if you are confined to a bed away from your home.

Inflation protection
Keeps your policy up to date with inflation by increasing your monthly benefit amount by a set percentage or the consumer price index.

Future Insurability
Allows you to increase the level of cover on your existing policy without submitting your medical history again when significant life events occur such as having children, buying a home or getting married.

Rehabilitation Benefit
Helps towards paying approved rehabilitation programs to help you get back to work sooner.

Death Benefits
Pays a lump sum benefit to your beneficiaries if you pass away and do not have life cover.

Please note the built-in benefits offered by each insurer may differ and there may be others not included in this list. Please consult the relevant PDS for further details or make sure mention your consultant which features are important you.

Additional cost options:

Income Protection policies generally offer a number of policy options designed to further enhance and customise your policy, which come at an additional cost or discount:

Mental health discount option

Receive a discount for excluding mental health from your policy.

Day 1 Accident Cover

If you suffer an accident and are confined to a bed for at least 3 consecutive days, you can receive 1/30th of your monthly benefit for each day you are confined to a bed, even during your waiting period.

Increasing claims option

Increases your monthly benefit each year by increases in inflation while you’re on claim

Superannuation contribution option

Select insurers offer to cover an additional 5% – 10% of your income to go specifically towards your superannuation.

Bed confinement option

If you are unable to work and are confined to a bed, you can receive 1/30th of your monthly benefit for each day of bed confinement, even during your waiting period.

Please note that each insurer may offer different policy options. Please consult the PDS or speak to your consultant for more information.

Other income protection information you may want to read:

Published: June 16, 2015

Ask an Expert?

4 Comments

  • steven samuel |

    Can you cover yourself for “redundancy using” income insurance?

    • Russell SPECIALIST
      Russell |

      Generally speaking income protection covers you for sickness & accidents only, however select insurer’s we work with offer a basic form of benefits to try to assist people who become unemployed through redundancy which we cover off in more detail here: Income Protection and Redundancy. If you require any further information please contact us.

    • glenn brown |

      You mention that IPI covers the employee in case of sickness. Is there any overlap between Trauma Insurance and Income Protection Insurance?

    • Brett Lenertz SPECIALIST
      Brett Lenertz |

      Great Question Glenn, Potentially there can be an overlap between Trauma Insurance & Income Protection. Firstly, to claim on Income Protection you must not be able to carry out at least one of your income producing duties to be eligible for claim. Keep in mind that Income Protection policies will have a benefit period which is the maximum time the Insurer will pay you benefits due to the injury or illness that you are claiming following any waiting period. If you potentially were able to meet the definition in the Insurer’s PDS for a ‘Trauma’ defined event then you could be eligible for the Trauma Insurance Lump Sum Benefit also, even if you are receiving benefits from the Income Protection Policy. It is important to keep in mind that Income Protection and Trauma definitions within the PDS may vary between Insurer’s and likewise some policies can have certain restrictions and exclusions that may apply.

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