Income Protection Benefit Period
When reviewing income protection policies, you will need to decide how long you want your monthly benefit to be paid for. Depending on the insurer, you can generally choose a specific amount of years, 2 o 5, or up to a certain age, for example up to you age 65 or 70.
Published July 21, 2023
Compare, Save and Buy Income Protection
Or call us on:
1300 135 205
Income protection covers a portion of your salary if you cannot work due to illness or an injury. The benefits from this kind of cover is potentially paid for a length of time; known as the income protection benefit period.
What is an income protection benefit period?
This is the maximum period that your monthly benefit will be paid out if you’re unable to return to work because of an accident or illness. This benefit typically pays up to 70% of your regular income. Generally, this benefit payment continues until you return to work. Your doctor confirms you can return to work, or reach your maximum period, as stated in your policy documents.
How long is a typical benefit period?
Generally, the length of your income protection benefit period varies according to the level of cover you choose and your insurer. However, it’s most common to find that insurers offer short or long term periods. Short term periods typically provide cover for two or five years. On the other hand, long-term periods are usually up to a specific age.
Each option has its own set of pros and cons, and it’s important to compare all of the options available to you. This way, you’ll be able to find the right cover to suit your requirements.
Long vs Short benefit periods
| Short-term periods | Long-term periods |
|---|---|
| Generally, the period is set between two and five years. However, some insurers may offer a period of one or six years. | Long-term periods typically provide you with cover until you reach a certain age. Generally, this is up to age 65 or 70. Some insurers offer periods up to age 50 or 55. |
| Policies with a short-term period are ideal for covering illness or injuries that prevent you from working for a shorter time. | Typically, it provides you with a greater protection level against lessor and major illness or accidents that prevent you from returning to work longer. |
| Monthly premiums are typically lower as the benefits won’t need to be paid for an extended period. | Generally, the longer the period, the more expensive your premiums. |
Long-term benefit period
Meet Sarah, a 32-year-old woman from NSW who is looking for a long-term benefit period policy. She is a non-smoker and earns $68,570 per year as a business analyst. Sarah is considering two options, a policy with a benefit period to age 65 or age 70.
Sarah’s decision was based on her future goals and the possibility of developing any health conditions that may require her to take a break from work. Overall, Sarah believed that having a long-term benefit period policy until age 70 would give her the peace of mind to focus on her career and her family without worrying about finances.
Sarah’s monthly premiums would be the following based on the benefit period she chooses:
To age 65
- Zurich Wealth Protection Income Safeguard – $101.66
- Clearview ClearChoice Income Protection (IP60) – $102.27
- NEOS Protection Income Support Standard – $107.49
- TAL Accelerated ProtectionIncome Protection Enhance – $115.29
- MetLife Protect Income Cover – $117.02
- OnePath OneCare Income Secure Protection – $117.84
To age 70
- MLC Insurance Income Assure + (Vivo Incentive) – $151.54
- MLC Insurance Income Assure + – $151.54
- MLC Insurance Income Assure + including Booster (Vivo Incentive) – $181.85
- MLC Insurance Income Assure + including Booster – $181.85
Source: Life Insurance Direct Comparison Engine (July 2023; Premium estimates for a 32-year-old non-smoking female, living in NSW who earns $68,570 annually and works as a business analyst)
Short-term benefit period case study
John is a 35-year-old male living in NSW who works as an accounts clerk and earns $85,714 annually. He is interested in applying for income protection insurance and is considering a policy with a short-term benefit period of either 2 or 5 years.
John understands the importance of having a safety net in case he cannot work due to illness or injury. He has researched his options and is considering shorter benefit period options. Although it provides coverage for a shorter period, it has lower premiums, which fits his budget. John’s job and lifestyle have a lower risk of needing extended coverage, a shorter benefit period is a good choice for him.
John is relieved to have income protection insurance as a safety net for his family. He knows that unexpected events can happen and wants to ensure his income is protected in an emergency.
The monthly premiums that John could expect to pay based on the benefit period is as follows:
2-year benefit period
- NEOS Protection Income Support Standard – $39.66
- Clearview ClearChoice Income Protection (IP60) – $46.15
- TAL Accelerated Protection Income Protection Focus – Short BP – $49.36
- MetLife Protect Income Cover (Healthy Lives) – $49.78
- AIA Priority Protection Income Protection CORE – Flat 70% – $52.46
- OnePath OneCare Income Secure Protection – $54.22
Source: Life Insurance Direct Comparison Engine (July 2023; Premium estimates for a 35-year-old male living in NSW who works as an Accounts Clerk and earns an annual salary of $85,714 annually)
5-year benefit period
- NEOS Protection Income Support Standard (Preferred) – $44.24
- Clearview ClearChoice Income Protection (IP60) – $48.79
- TAL Accelerated Protection Income Protection Focus – Short BP (Health Sense discount) – $53.57
- MetLife Protect Income Cover (Healthy Lives) – $57.58
- MLC Insurance Income Assure – $59.09
- AIA Priority Protection Income Protection CORE – Flat 70% – $60.76
Source: Life Insurance Direct Comparison Engine (July 2023; Premium estimates for a 35-year-old male living in NSW who works as an Accounts Clerk and earns an annual salary of $85,714 annually)
How does it work?
Usually, the maximum period for benefit payments begins the day after the waiting period ends. However, you’ll only receive your benefits if your doctor confirms that you are still partially or totally disabled. You’ll generally need to provide proof that you are unable to return to work under the advice of a medical professional.
Generally, you’ll continue to receive your benefits unless one of the following conditions apply:
- Your policy expires: If your policy expires, this is typically age 65 or 70. However, you’ll need to check with your insurer and read your PDS to learn when your policy expires. Additionally, It’s your responsibility to ensure that premiums are paid on time, even when on claim, to keep your income protection policy up to date.
- Death of the insured: Benefits typically end when the insured member passes away.
- The payment period ends: Once you’ve reached the end of your compensation period as outlined in your product disclosure statement(PDS).
- You return to work: After you have recovered from your illness or injury and are well enough to go back into employment, your income protection benefits won’t pay out any more.
- Doctors Advice: The Doctor confirms you can continue the duties of your occupation.
Take note:
- Your policy can be cancelled or amended anytime your insurer discovers that you have not disclosed all relevant medical information. It’s best to be as honest as possible with your insurer to ensure your policy remains active.
- Your benefit period may also expire if you no longer meet your eligibility requirements. The criteria for being unable to perform work changed on the 1st of October 2021 from only one duty to all important duties for the first two years, and then any occupation thereafter, as long as the individual is under the care of a medical professional and not working.
How to choose the best income protection payment period
Generally, there are several things that you’ll need to take into consideration when selecting the maximum period for benefits to be paid on your policy; this includes:
- Everyday expenses: You will need to keep in mind what your everyday living expenses will be in the foreseeable future. It may also be a good idea to think about how long you’ll be able to afford to pay these expenses without earning an income.
- Income protection through your super: If you have salary continuance through your superannuation fund, you may want to examine the amount of cover you have and your payment periods before deciding about additional income protection policies.
- Ongoing debts: Ongoing debts like mortgage repayments, credit card repayments, and any other loans need to be paid even if you cannot work because of an injury or illness.
- Affordability of premiums: Longer benefits are typically more expensive. You’ll need to find a balance between your budget and the period you’d like.
- Your job: You may want to think about the risks associated with your profession. If you have a high-risk job, you may want to consider a policy with an extended period.
Are they the same as waiting periods?
No, this period typically refers to the maximum amount of time the monthly benefits will be paid to you. On the other hand, the other hand, the waiting period refers to the amount of time you’ll need to be off work before your benefits start. In contrast to compensation periods, your premiums will generally be cheaper if you choose an extended waiting period.
Frequently asked questions and answers
-
How long should your benefit period for income protection be?
Generally, it’s a good idea to look for the longest period for benefit payments possible, for instance, to age 56 or 70. However, you may have to reduce this based on your occupation (select insurers restrict high-risk occupation to 2 or 5 year periods, policy periods on offer or affordability. -
What do you need to know about choosing a benefit period?
You’ll also need to consider your current financial circumstances, including your debts, monthly expenses, and lifestyle, as this will give you a good starting point on the duration of the payment period you may want to consider. -
Are 2 or 5 year benefit periods better?
Typically, these are both short-term periods. To decide which option is best for your requirements, you may want to consider the total maximum benefit potentially payable. For example, 2 years x 70% of your yearly salary = x vs 5 years x 70% of your salary = 2 ½ X; therefore, the 5 year period could provide you with a far greater payout if the condition is long term. -
Does the length of the benefit affect your premium?
Yes, the length of your payment period will generally influence the premiums on your policy. Typically, the longer your compensation period, the more expensive your premiums. This is because extended payment periods are associated with a higher potential payout to the insurer. -
Can you choose your own period?
Yes, you’ll generally be able to choose between the options provided in the product disclosure statement of the policy you are considering buying the policy from, typically options are 2 years, 5 years or up to age 65 or 70 -
What happens when your income protection benefit period is over?
Generally, when you reach the end of your payment period, your insurer will stop paying you benefits for that relevant condition. If your policy has not expired, you will typically retain the policy but no longer claim on the relevant condition. Refer to your PDS for more information.
Get an instant Income Protection quote
Or call us on:
Does your IP cover pre existing conditions, specifically a rotator cuff injury?
Hi Yaninka,
Thank you so much for the question. Your eligibility to cover pre-existing conditions will depend on the severity of the injury, treatment, degree of recovery and how long ago it was. However, I would recommend calling us on 1300 743 254 or filling in the Contact Us form so that a specialist cant get back to you to discuss your requirements and conduct a pre-assessment.