Income Protection Insurance Waiting Periods

When unexpected circumstances disrupt your ability to earn a living, income cover could help you maintain financial stability. Waiting periods play a crucial role in determining when your benefits will commence. Designed to balance cost and coverage, these periods vary from weeks to months. Discover the optimal waiting period for your requirements.

Published May 19, 2023

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What is an income protection waiting period?

An income protection waiting period refers to the specified duration during which you cannot work before your benefit period begins. The terms of your insurance policy determine the length of this waiting period. Waiting periods can range typically from 30 days to 2 years, after which your monthly benefit is paid retrospectively. Some insurers offer partial disablement coverage from the start of the waiting period, although such policies are uncommon.

Income protection insurance waiting period options

These waiting periods represent the time you must wait before receiving benefits in case of an injury or illness that prevents you from working. Selecting the appropriate waiting period is an important consideration when choosing an income protection policy, as it affects the cost of premiums and the time it takes to access financial support.

Waiting period options include:

When does my income protection waiting period start?

The timing of your waiting period is not based on when the illness or injury initially happens. Instead, it starts when a medical professional specifically recommends that you refrain from working due to illness or injury. In other words, the waiting period begins when a healthcare expert assesses your condition and advises you to take time off work for the sake of your health.

To illustrate, let’s consider a scenario where you’ve been experiencing back pain for the past two months following a serious fall. Despite the pain, you’ve continued working without seeking medical attention. As a result, you’ve depleted your sick leave and want to avoid utilising your annual leave. Finally, you decide to consult a doctor regarding your back pain. Your waiting period commences only when the doctor declares that you are unfit for work and need time off.

How does my choice of waiting period affect my premium?

Your income protection waiting period generally plays a role in determining the cost of your premiums. The waiting period refers to the length of time you must wait (be off work) before receiving benefits if you cannot return to work on your doctor’s advice. 

Generally, shorter waiting periods result in higher premiums, as they offer quicker access to benefits. On the other hand, opting for longer waiting periods can help lower your premiums, as it extends the time you must be off work due to sickness or injury  before the benefit period commences . When choosing a waiting period, it’s essential to balance affordability and the level of financial security you have during the waiting period.

Case study

In this scenario, we have an accountant who is 35 years old, male, residing in New South Wales (NSW). He earns an annual income of $85,714 and has decided to protect 70% of his salary through an income protection policy. Additionally, he has chosen a $5,000 monthly benefit on an indemnity policy.

Waiting PeriodBenefit PeriodMonthly PeriodPremiumPremium as % of Salary
14 daysTo age 65$5,000$87.591.23%
30 daysTo age 65$5,000$41.750.58%
60 daysTo age 65$5,000$38.210.54%
90 daysTo age 65$5,000$28.760.40%
180 daysTo age 65$5,000$28.310.40%
365 daysTo age 65$5,000$28.120.39%
730 daysTo age 65$5,000$27.030.38%

Source: Life Insurance Direct Comparison Engine (May 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 my waiting period affect my ability to claim?

Your chosen waiting period significantly impacts your ability to claim on your income cover policy. You cannot immediately receive income protection payments when you become ill or injured. Instead, you become eligible to receive benefits once your claim has been approved and the waiting period you selected has been fulfilled.

The duration of your waiting period typically influences the likelihood of making a successful claim. A longer waiting period means you are more likely to recover and return to work before the waiting period ends, making it more challenging to claim benefits. On the other hand, a shorter waiting period increases the likelihood of still being unable to work during that period, thus improving your ability to claim on the policy. Therefore, it’s important to carefully consider your circumstances and the potential duration of your incapacity when selecting a waiting period that aligns with your needs.

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How long until I can make a claim?

To claim your income protection policy, get confirmation from a medical professional if you cannot work. This will give you an idea of how long you’ll be off work. If it’s beyond the waiting period, you can potentially lodge¬† a claim. Keep in mind each insurer may require different consecutive days of total incapacity before initiating a partial disablement claim. Before choosing a provider/policy, read their product disclosure statements for full details.

Can I get income protection with no waiting period?

Typically, all income protection policies have a mandatory waiting period, and it’s only possible to get income protection coverage with a waiting period. However, certain additional features might be included in your policy or that you can choose to add. These optional benefits provide added flexibility and customisation to your coverage. Some examples of these optional benefits are claim indexation, severity boosters, and super contribution options.

Which waiting period should I choose?

When considering which waiting period to choose for your income protection policy, it’s important to consider several factors. Here are some key considerations to help guide your decision:

Frequently Asked Questions and Answers

  • When does my income protection waiting period start?

    The timing of your waiting period is not based on the moment when the illness or injury initially happens. Instead, it starts when a medical professional specifically recommends that you refrain from working due to illness or injury. In other words, the waiting period begins when a healthcare expert assesses your condition and advises you to take time off work for the sake of your health.
  • How does my choice of waiting period affect my premium?

    Your income protection waiting period plays a role in determining the cost of your premiums. Generally, shorter waiting periods result in higher premiums, as they offer quicker access to benefits. On the other hand, opting for longer waiting periods can help lower your premiums, as it extends the time you must be unable to work before the benefit period commences. When choosing a waiting period, it’s essential to balance affordability and the level of financial security you have during the waiting period.
  • Which waiting period should I choose?

    To select the right waiting period for your income protection policy, several factors should be considered. Employment status is crucial. As a full-time employee, longer waiting periods may prove prudent, resulting in less expensive premiums if sick or annual leave is available. Affordability is another key factor. Assess your financial situation to optionally reduce premium amounts via longer waiting periods in the case of savings and few commitments. Conversely, if self-employed or lacking substantial savings, consider shorter waiting periods such as 14 days or 30 days..
  • How does employment status affect the choice of waiting period?

    Your employment status plays a significant role in determining the ideal waiting period. If you are a full-time employee with access to sick and annual leave, you might consider opting for a longer waiting period. This choice can result in lower premiums since you have some coverage through your leave entitlements. However, if you are self-employed or lack substantial leave entitlements, a shorter waiting period might be more suitable.
  • What waiting period should I consider if I have part of my income protection in superannuation?

    If you have part of your income protection within your Superfund, it’s important to consider the waiting period that aligns with your needs. The 2-year waiting period is often popular among individuals who hold another income protection policy within their Superfund. However, remember that when a policy is held within Super, you must meet the policy’s claim definition and the Super’s conditions of release to access the funds outside of the superannuation environment. Consider your Superfund’s specific conditions and requirements when choosing a waiting period for your income protection policy.

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