Income Protection Monthly Benefits Explained

The Income Protection monthly benefit is the amount you receive each month while on claim. The benefit is designed to help cover part of your income while you are unable to work.

Published July 4, 2018

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You can receive up to 75% of your income per month when you go on claim, however, how much you receive will depend on what policy type you have and if you want the full 75% of your income covered.

Income Protection Policy Types:

Generally, there are two policy types available:

Agreed Value

Your income agreed to at the time of your policy application and is guaranteed when proof of income is provided to the insurer.

Indemnity Value

Your benefit is not guaranteed and will be the lesser of:

  • The insured benefit as set out in your policy schedule; and
  • 75% of your pre-disability income

Indemnity policies are generally cheaper than agreed value policies as they do not require you to prove your income at the time of your policy application and therefore your benefit is susceptible to any reductions in your income.

When does the benefit begin?

You will start to receive your monthly benefit when your benefit period begins, which is at the end of your waiting period.

How long will I receive my benefit for?

Generally you will receive your benefit from the end of the waiting period until the earliest of:

Can my monthly benefit increase?

You can opt to increase your monthly benefit in a number of ways:

1. Inflation Protection

Select insurers will generally offer ‘Inflation Protection’, also known as Benefit Indexation, which increases your benefit by the increase in the Consumer Price Index each year. The increase is made on the anniversary of your policy.

Please note while this is automatically applied to your policy, you can opt out of the increase if you wish.

2. Increasing Claims Option

Increases your monthly benefit while you on claim. Your benefit will increase each year by the greater of CPI or 5%.

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3. Future Insurability Benefit

The Future Insurability Benefit allows you to increase your level of cover when significant live events occur without submitting your medical history again.

Depending on your insurer, the maximum amount you can generally increase your cover by is the lesser of:

4. Mortgage Booster Option

The Mortgage Booster Option allows you to increase your cover by 5% if you are contributing at least 5% of your monthly earnings towards paying a mortgage on your main residence at the time of the policy application. Generally this will be paid for a maximum of 24 months.

5. TPD/Severity Booster Benefit

The TPD/Severity Booster Benefit increased your monthly benefit by one third if:

6. Superannuation Booster

The Superannuation Booster Option increases your monthly benefit by 5% if you or your employer is contributing at least 5% of your monthly earnings towards superannuation at the time of the policy application. An additional benefit will be paid to the superannuation fund you have nominated.

7. Can my monthly benefit be reduced?

Generally all income protection policies will have a clause which states your income protection benefit will be reduced if your income protection monthly benefit and any other income you are receiving exceeds 75% of your income.

Amounts that are generally offset include regular payments made under:

This clause is inserted into policies so that the insured has an incentive to go back to work and is not receiving more than what they were earning prior to their claim.

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