Income Protection
Insurance Explained
Income protection insurance is designed to replace part of your income if illness or injury leaves you unable to work, subject to the policy definition and conditions.
What Is Income Protection Insurance?
Income protection can provide regular payments for a period if you meet the policy's definition of disability and cannot work because of illness or injury.
Part of Your Income
Policies generally replace a percentage of eligible pre-tax income rather than your entire income.
Waiting Period
The period you generally need to be unable to work before benefit payments can begin.
Benefit Period
The maximum period benefits may continue while you remain eligible under the policy.
Policy Definition
Each policy defines disability and sets the conditions that must be met before a benefit is payable.
Waiting Period vs Benefit Period
These two terms sound similar but affect very different parts of your cover.
⏱ Waiting Period
This is the period between becoming unable to work and becoming eligible for benefit payments, assuming the policy conditions are met.
- Shorter waiting periods can affect premium cost
- Consider your sick leave and emergency savings
- Available periods differ between policies
📆 Benefit Period
This is how long eligible payments can continue while you remain unable to work and satisfy the policy requirements.
- Policies may offer fixed periods such as two or five years
- Some cover may continue to a specified age
- Longer benefit periods can affect premium cost
You May Already Have Income Protection Cover
Some superannuation funds provide income protection or salary continuance insurance to members. Before taking out separate cover, check your current super fund and understand what insurance you already hold.
- Check the amount of income insured.
- Check the waiting and benefit periods.
- Check what happens to cover if your super account becomes inactive or your circumstances change.
- Remember that insurance premiums deducted from super reduce your super balance over time.
Factors Insurers May Consider
Eligibility, premiums and policy terms can depend on personal, occupational and financial circumstances.
Age
Your age can affect eligibility, available policy terms and premium cost.
Occupation
The duties and risk level associated with your occupation can influence underwriting and premiums.
Health History
Medical history may affect eligibility, exclusions, premium loadings or other policy terms.
Income
Your earnings are relevant because income protection benefits are generally linked to eligible income.
Four Things Worth Checking
Work Out Your Income Gap
Consider essential expenses, savings, sick leave and other financial resources if you could not work.
Check Existing Cover
Review any income protection insurance you already have, including through your super fund.
Read the PDS
Review disability definitions, exclusions, waiting periods, benefit periods, premiums and claim requirements.
Consider Affordability
Consider both the current premium and how premiums may change over time.
💳 Premiums & Tax
In Australia, premiums you personally pay for insurance that protects salary or wage income can generally be tax deductible. However, not every component of every insurance arrangement is necessarily deductible.
Tax rules depend on how the cover is structured and who pays the premium, so consider ATO guidance or professional tax advice for your circumstances.
🧾 Benefits & Tax
Income protection payments that replace salary or wages generally need to be included in your tax return.
The tax treatment of insurance through super or policies containing other benefits can differ, so individual advice may be appropriate.
Read the Policy Before You Buy
Income protection policies contain exclusions and eligibility requirements. A policy may exclude or restrict cover for particular circumstances, activities or medical conditions. Insurers can also ask about matters such as your occupation, income, medical history, smoking, lifestyle and higher-risk activities.
Information provided to an insurer should be accurate. The Product Disclosure Statement (PDS) explains the cover, exclusions, premium structure, claim requirements and other important terms.
Income Protection Insurance FAQs
These answers provide general information only. Actual benefits and conditions depend on the particular insurance policy.
1. What is income protection insurance?
It is insurance designed to replace part of your income for a period if you cannot work because of illness or injury and meet the policy's claim requirements.
2. Does income protection replace all of my salary?
Generally no. Policies usually insure a percentage of eligible income rather than 100% of your salary. The percentage and calculation method depend on the policy.
3. What is a waiting period?
The waiting period is the period you generally need to remain unable to work before benefit payments can begin, assuming all policy conditions are met.
4. What is a benefit period?
The benefit period is the maximum period that eligible payments may continue while you remain unable to work and continue to satisfy the policy requirements.
5. What benefit periods are commonly available?
Policies may offer periods such as two years, five years or cover to a specified age. Available options differ between insurers and products.
6. Can I have income protection through my super?
Yes. Many super funds offer income protection or salary continuance insurance. Check your super account and policy documents to see whether you already have cover.
7. Is income protection automatically included with super?
Not always. Some funds provide it automatically in particular circumstances, while others do not. Check directly with your super fund.
8. Are income protection premiums tax deductible?
Premiums you personally pay to protect salary or wage income can generally be deductible, but the treatment depends on the policy and circumstances. Check current ATO guidance or obtain tax advice.
9. Are income protection payments taxable?
Payments that replace salary or wages generally need to be included in your tax return. Different arrangements can have different tax consequences.
10. Does income protection cover unemployment?
Income protection is generally designed for inability to work because of illness or injury, not ordinary unemployment or redundancy. Always check the particular policy wording.
11. Are pre-existing medical conditions covered?
They may affect underwriting and can result in exclusions, loadings or other terms. The treatment of a pre-existing condition depends on the insurer and policy.
12. Does my occupation affect the premium?
It can. Insurers may consider your occupation, work duties and occupational risk when determining eligibility, premiums and policy terms.
13. What happens if I change jobs?
The effect depends on the policy and whether cover is held personally or through super. Review your cover when your employment or occupation changes.
14. How much income protection cover do I need?
Consider your essential expenses, debts, savings, sick leave, existing insurance and how long you could manage without your usual income. Personal financial advice may help with this decision.
15. Can I get an Income Protection quote through Policy Direct now?
Not currently. Policy Direct is developing this section. For now, this page provides general information only and does not offer an Income Protection Insurance quote or comparison service.
Income Protection Insurance Options — Coming Soon
Policy Direct is working on expanding this section. Until then, use this guide to understand the important features to consider and check whether you already have cover through your superannuation fund.
COMING SOON