Life Insurance Australia :: Articles

Income protection insurance

What is income protection insurance and why is it important for Australians?

Income protection insurance

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

It's trite but true to say that, for most people, their most valuable asset is their ability to earn an income. But how relevant is income insurance to most Australians?
Ask yourself what would happen if you woke up tomorrow and found you were incapable of working for an extended period.
Could you support your household?
Meet your loan repayments?
Save for the future?
Income protection insurance, also known as disability insurance, pays you an income if you are unable to work because of sickness or injury.
You can insure to receive payments (usually monthly) of up to 75 per cent of your current income while you're out of action.

Doesn't WorkCover or my super fund already protect me?

Insuring your most valuable asset
Image for Insuring your most valuable assetWhile many people would consider their home or their car to be their most valuable asset, it's your ability to earn an income that is most important in shaping your financial future. Statistically, two thirds of working Australians will suffer an injury or illness that will sideline them for 90 days or more. The majority of these people would not be able to pay their mortgage or meet car finance and other loan commitments without adequate income insurance.
WorkCover protects you if your injury is connected with work. But it doesn't cover you for sickness or if you have an accident hiking on holidays.
It's worth checking on your super fund, though. Many super funds now provide salary continuance insurance which will pay you an income for up to two years if you're unable to work.
This may mean you can get away without income protection insurance, or opt for a cheaper policy.

How do I choose an income protection policy?

It's worth talking to an adviser (as opposed to a salesperson) about which one suits your needs. Most insurers have several products on offer and a range of options that come with each product.
The first choice is between an agreed-value policy and an indemnity policy.
With an agreed-value policy, you have to prove your income up front, but once that's done, you know exactly what you'll be paid if you're unable to work.
This type of policy is more expensive, but suits people like the self-employed who have variable incomes and want some certainty about their claims.
With an indemnity policy, the company generally insures you for what you say you earn up front, but asks you to verify your income if you make a claim.
Both types of policy can be increased each year for inflation, but if you're likely to have a rising income, it may also make sense to choose a policy that allows you to increase the sum insured without the need for new applications and medicals.
Income protection policies also come in basic and deluxe versions.
The basic version generally provides you only with income payments while the deluxe version can have add-ons such as paying nursing care or accommodation benefits or paying benefits immediately if you have an accident - rather than insisting on the normal waiting period.
It's also important to understand exactly when you can claim.
All income protection policies include definitions on when you are unable to work.
Some of the cheaper policies, for instance, say you can claim only if you are unable to perform your normal job; other policies will pay if you are unable to perform one or more of your important duties.
Policies also have exclusions - circumstances in which they won't pay - which are worth knowing.
There is also a range of choices to make on issues such as how long you're prepared to wait before making a claim and how long you want the income payments to go for if you do claim.

Is income protection expensive?

Premiums can vary significantly.
As a rule, women and blue-collar workers pay more, though the increase in stress-related claims by white-collar workers has resulted in higher premiums - especially for professionals such as doctors and lawyers.

Can I do anything to cut the costs?

Income protection insurance is tax-deductible, so the costs can be reduced by making sure you claim your premiums in your annual tax return. (But any claims you make will be taxed as income.)
Outside this, the simplest way to cut the premium is to opt for a longer waiting period or limit the period in which you can claim.
Waiting periods can extend as far as two years while income payments can be for as little as a couple of years or up to age 65.
Some insurers will give you a discount if you provide evidence of your income up front, and some offer lower premiums if you agree to a 12-month limit on payments for conditions caused by mental disorders such as depression or stress.
Many people also don't realise that they can insure for less than 75 per cent of their income - maybe insuring the full amount for the first two years and then 50 per cent after that.
Needless to say, you can also cut costs by not paying for extras that you don't think you'll need.
But bear in mind that the real test of the policy comes when you make a claim - paying a few extra dollars for certainty can be better than simply taking the cheapest deal going

Published: Sunday, 1st Aug 2021
Author: Paige Estritori


Life Insurance Articles

A Millennial's Guide to Life Insurance
A Millennial's Guide to Life Insurance
For many millennials, navigating the complexities of personal finance and future planning can feel like a bewildering journey. Among these financial responsibilities, life insurance emerges as a paramount consideration. More than just a safety net, life insurance can be the cornerstone of a sound financial strategy, providing peace of mind for both the policyholder and their loved ones. - read more
Understanding Life Insurance: How to Determine Coverage Amounts
Understanding Life Insurance: How to Determine Coverage Amounts
Life insurance is a cornerstone of financial planning, offering peace of mind to you and security for your loved ones. It's a contract between you and an insurance company: in exchange for regular premiums, the insurer agrees to pay a sum of money to designated beneficiaries upon your passing. This vital tool ensures that your family's financial needs can be met during an incredibly difficult time. - read more
The Impact of Parenthood on Your Life Insurance Choices
The Impact of Parenthood on Your Life Insurance Choices
Life insurance, a contract between an insurer and a policyholder, is designed to provide financial protection to loved ones in the event of the policyholder's death. For parents, this protection takes on a new level of significance. The birth of a child heralds a profound shift in priorities, with a focus on safeguarding the future of one's family. Hence, understanding life insurance options becomes a crucial aspect of responsible parenting. - read more
Understanding Life Insurance: How to Get the Best Online Quotes
Understanding Life Insurance: How to Get the Best Online Quotes
The digital age has fundamentally transformed how we approach almost every aspect of our lives, including the way we shop for life insurance in Australia. Gone are the days when one had to schedule meetings with insurance agents or flip through pamphlets to understand life insurance policies. Today, obtaining life insurance quotes online has become the norm, offering a hassle-free and incredibly accessible platform for individuals to safeguard their financial future. - read more
Life Events That Should Trigger a Life Insurance Review for Aussie Families
Life Events That Should Trigger a Life Insurance Review for Aussie Families
Life insurance is a cornerstone of financial planning for Aussie families, offering protection and peace of mind. But what happens when the bustling flow of life brings changes? This is where a life insurance review comes into play. A life insurance review is a thorough analysis of your existing policy to ensure it aligns with your current life circumstances and financial goals. - read more

Insurance News

TAL's Health Sense Plus Now Covers Income Protection Policies
TAL's Health Sense Plus Now Covers Income Protection Policies
04 Feb 2026: Paige Estritori
In a significant development for policyholders, TAL has expanded its Health Sense Plus program to encompass income protection (IP) policies. This initiative, effective from August 8, 2025, aims to incentivise proactive health management by offering premium discounts to clients who engage in preventative health checks. - read more
Surge in Mental Health Claims Puts Pressure on Australia's Insurance Industry
Surge in Mental Health Claims Puts Pressure on Australia's Insurance Industry
04 Feb 2026: Paige Estritori
Australia's insurance sector is facing unprecedented challenges as mental health conditions have become the leading cause of total and permanent disability (TPD) claims. Recent data from the Council of Australian Life Insurers (CALI) reveals that mental health issues now account for nearly one-third of all TPD claims paid out. - read more
Rest Super Faces Class Action Over Alleged Wrongful Deduction of Income Protection Premiums
Rest Super Faces Class Action Over Alleged Wrongful Deduction of Income Protection Premiums
04 Feb 2026: Paige Estritori
Shine Lawyers has initiated class action proceedings in the Federal Court against Rest Superannuation, alleging that the fund wrongfully deducted income protection premiums from members' accounts between December 2008 and June 2019. The lawsuit claims that up to 500,000 Rest members may have been affected by these deductions. - read more
Marine Skippers Insurance Expands to International Waters
Marine Skippers Insurance Expands to International Waters
04 Feb 2026: Paige Estritori
Marine Skippers Insurance has recently unveiled a new international coverage plan tailored for captains navigating vessels to and from Australia. This development is particularly timely, coinciding with preparations for the upcoming Sydney to Hobart yacht race. - read more
NM Insurance and Zurich Forge Long-Term Partnership
NM Insurance and Zurich Forge Long-Term Partnership
04 Feb 2026: Paige Estritori
NM Insurance has solidified its position in the marine insurance sector by entering into a five-year agreement with capacity provider Zurich. This strategic partnership is set to bolster NM Insurance's growth trajectory and instill greater confidence among brokers. - read more

Start Here !
life insurance
Apply now for your free Insurance assessment and price comparisons!

Start Here

Life Cover Amount:
Postcode:

All quotes are provided free and without obligation by a Specialist from our National Broker referral panel. See our Privacy Statement for more details.


Knowledgebase
Income Insurance:
Insures your income in the event of you being unable to work due to sickness or accident.