How You Can Save On Your Income Protection Insurance

Have you found taking out income protection too expensive or are your premiums becoming unaffordable? We have come up with eight ways you can reduce your premiums to help make them more affordable:

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number-1Increase your waiting period

The waiting period is the amount of time you will need to wait once becoming totally disabled before your monthly benefit will begin.

The shorter your waiting period is, the higher your premium will be. By increasing the waiting period, you could potentially save over 40%. However, you must be mindful of the impact a shorter waiting period can have on your policy.

Things to consider when choosing your waiting period include:

  • How long you can afford to go without receiving an income
  • Any savings you have
  • Leave entitlements available, including sick, annual and long service leave
  • If you are self-employed

30 day waiting period vs 90 Day waiting Period

Annual SalaryMonthly BenefitMonthly Premium for a 30 Day Waiting PeriodMonthly Premium for a 90 Day Waiting PeriodSaving
$150,000$9,375.00$110.38$62.5543%
$100,000$6,250.00$73.58$41.7043%
$85,000$5,312.50$62.54$35.4443%
$60,000$3,750.00$47.87$27.0543%

The above table was calculated using the Life Insurance Direct App, based on a 40-year-old, non-smoking, male Accountant, living in NSW (August 2018). An Indemnity income protection policy, with a benefit period of up to age 65.

Please note, while premiums are based on actuals, they are examples only and may not be indicative of actual premium availability.

number-2Decrease your benefit period

The benefit period refers to how long you will receive your monthly benefit for if you suffer a sickness or injury and are unable to work for longer than your waiting period.

The longer your benefit period is, the higher your premiums will be. A shorter benefit period also means the maximum benefit you can receive is reduced.

By reducing your benefit period, you can potentially save over 25%.

Income Protection Benefit Period: 2-years vs 5-years vs to age 65 or 70

Annual SalaryMonthly BenefitMonthly Premium for a 2 year Benefit PeriodMonthly Premium for a 5 year Benefit PeriodMonthly premium for a "To Age 65" Benefit PeriodMonthly premium for a "To Age 70" Benefit Period
$150,000$9,375.00$69.17$80.81$110.38$124.34
$100,000$6,250.00$46.12$53.87$73.58$82.89
$85,000$5,312.50$39.20$45.79$62.54$70.45
$60,000$3,750$29.19$34.94$47.87$53.93

The above table was calculated using the Life Insurance Direct App, based on a 40-year-old, non-smoking, male Accountant, living in NSW (August 2018). Indemnity income protection policy, with a 30-day waiting period.

Please note, while premiums are based on actuals, they are examples only and may not be indicative of actual premium availability.

number-3Remove Inflation Protection

Inflation Protection or Benefit Indexation is generally automatically applied to your policy to protect it from increases in inflation.

When applied. your insured amount will increase each year on your policy renewal date by either a set percentage or the rise in the Consumer Price Index (CPI).

You can opt out of the increase if you wish, allowing you to save on your premiums. You can choose to opt out once or permanently.

number-4Only cover what you need

When taking out income protection, you should make sure you are covered for your needs – having too little or too much cover may not be adequate.

While income protection generally covers up to 75% of your salary, if you do not need this amount, you may want to reduce your level of cover.

Choosing the percentage of your income you want covered

SalaryPercentage of Salary CoveredMonthly BenefitMonthly Premium
$100,00075%$6,250$34.92
$100,00070%$5,833$32.47
$100,00060%$5,416$30.38

The above table was calculated using the Life Insurance Direct App, based on a 30-year-old, non-smoking, male Accountant, living in NSW (August 2018). Indemnity income protection policy, with a 30-day waiting period and 2-year benefit period.

Please note, while premiums are based on actuals, they are examples only and may not be indicative of actual premium availability.

number-5Compare Quotes

It’s important to compare quotes from a range of insurers. We compare some of the leading life insurers in Australia and can provide you with a detailed report for each of those insurers.

Compare income protection quotes

InsurerMonthly BenefitMonthly Premium
AIA Priority Protection Vitality$6,250$34.92
MLC Insurance with On Track$6,250$36.82
ClearView Life Solution$6,250$39.68
TAL Accelerated Protection with Health Sense$6,250$43.80

The above table was calculated using the Life Insurance Direct App, based on a 30-year-old, non-smoking, male Accountant, living in NSW (August 2018). Indemnity income protection policy, with a 30-day waiting period and 2-year benefit period.

Please note, while premiums are based on actuals, they are examples only and may not be indicative of actual premium availability.

number-6Quit Smoking

Smokers typically pay more for insurance compared non-smokers, due to the increased health risks associated with smoking.

If you are a smoker you may be able to save on your premiums by quitting smoking. In some cases, if you have stopped smoking for 12 months, including not using quitting aids such as nicotine patches or gums, you may be able to get your premiums reduced.

Compare smoker vs non-smoker income protection rates

InsurerMonthly BenefitMonthly Premium for SmokersMonthly Premium for Non-smokersSavings
AIA Priority Protection Vitality$6,250$43.65$34.9220%
MLC Insurance with On Track$6,250$44.12$36.8217%
ClearView Life Solution$6,250$49.61$39.6820%
TAL Accelerated Protection with Health Sense$6,250$55.30$43.8021%

The above table was calculated using the Life Insurance Direct App, based on a 30-year-old male Accountant, living in NSW (August 2018). Indemnity income protection policy, with a 30-day waiting period and 2-year benefit period.

Please note, while premiums are based on actuals, they are examples only and may not be indicative of actual premium availability.

number-7Take cover out early

Generally, the younger you are when you take out cover, the cheaper your premiums will be as in most cases insurance costs increase as you age. You are also less likely to have serious medical conditions when you are younger, which can impact on the cost of cover.

Income protection premiums according to age

AgeMonthly BenefitMonthly Premium
25$6,250$33.38
30$6,250$34.92
35$6,250$38.62
40$6,250$46.12
45$6,250$60.91
50$6,250$88.38

The above table was calculated using the Life Insurance Direct App, based on a non-smoking male, Accountant, living in NSW (August 2018). Indemnity income protection policy, with a 30-day waiting period and 2-year benefit period.

Please note, while premiums are based on actuals, they are examples only and may not be indicative of actual premium availability.

number-8Remove Unnecessary Options

Income Protection comes with a number of options which are designed to customise and enhance your policy. However, these do cost extra, and it is important to balance affordability with enhanced cover.

Plus income protection vs standard

InsurerMonthly BenefitMonthly Premium with Options (Plus)Monthly Premium without Options (Standard)Savings
AIA Priority Protection Vitality$6,250$41.55$34.9216%
MLC Insurance with On Track$6,250$41.61$36.8212%
ClearView Life Solution$6,250$44.64$39.6811%
TAL Accelerated Protection with Health Sense$6,250$49.12$43.8011%

The above table was calculated using the Life Insurance Direct App, based on a 30-year-old non-smoking male Accountant, living in NSW (August 2018). Indemnity income protection policy, with a 30-day waiting period and 2-year benefit period. Options included Accident Benefit and Claims Escalation.

Please note, while premiums are based on actuals, they are examples only and may not be indicative of actual premium availability

Important: The policy price should not be the only factor considered when choosing insurance. It is always important to read the relevant Product Disclosure Statement (PDS) to find out what features and benefits are offered and to consider your own personal circumstances. You might want to consult a specialist before you act on this information and sure make your decision is suited to your personal circumstances or your insurance needs.

Published: August 13, 2018

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