How much does income protection insurance cost?

How much is income protection insurance?

How much you pay for income protection insurance will depend on your age, gender, if you smoke, your occupation, and other factors. Here’s the average weekly premiums for direct income protection insurance based on policies our database, at the time of writing:

Average Weekly Direct Income Protection Insurance Premiums – $4,500 Monthly Benefit Limit

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Source: www.canstar.com.au. Based on products rated in Canstar’s 2026 Direct Income Protection Insurance Star Ratings (February 2026).

Average Weekly Direct Income Protection Insurance Premiums – $6,000 Monthly Benefit

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Source: www.canstar.com.au. Based on products rated in Canstar’s 2026 Direct Income Protection Insurance Star Ratings (February 2026).

Professional and white-collar workers, like accountants and receptionists, generally pay the lowest premiums. The highest premiums are typically paid by heavy blue-collar workers, like truck drivers, mechanics, and commercial cleaners. Light-blue collar workers are usually the likes of sales representatives, hair dressers, and building foremans, whereas medium-blue collar typically refers to boilermakers, carpenters, and registered nurses.

The category your particular job falls into will vary between insurers, and you can check with them for more information.

What affects the cost of income protection insurance?

The cost of income protection insurance is influenced by a number of factors, including your age, gender, smoking status, and occupation. Older Australians, smokers, and people in more physically demanding or potentially dangerous jobs are generally charged higher premiums, as they’re seen to be at greater risk of illness or injury. Women also tend to be charged higher premiums than men.

The insurance provider you choose and the features of a policy, like how long you’ll be able to receive financial cover for and how much you’re insured to receive each month, can also affect your premiums.

If you’re a smoker, quitting could reduce your income protection premiums considerably, same for your direct life insurance premiums. Insurers usually classify smokers as people who use any nicotine product, which can include vaping, chewing tobacco, or using nicotine patches.

Another factor that can impact the overall cost of income protection is how your premiums are treated for tax purposes. Income protection insurance premiums are sometimes tax deductible. Consider seeking professional tax advice if you’re in doubt and visit the Australian Taxation Office’s website for more information.

How to lower the cost of your income protection insurance premium

• Shop around: Comparing policies and getting quotes from different providers can help you save without compromising your cover.

• Pay your premiums annually rather than monthly: Providers will often reduce your premium if you pay annually rather than month-to-month.

• Online and multi-policy discounts: If you plan on taking out a policy for the first time or switching providers, you may be able to get an online discount. You might also be able to get a multi-policy discount if you take out a policy with a provider you’re already a customer of. While discounts might be a nice bonus, it’s important to ensure the coverage you’re receiving is adequate for your needs.

• Assess or review your coverage: Think about your financial situation and select a benefit amount and period that matches your needs. If you already have a policy, it’s worth regularly reviewing your benefit amount and period to make sure they still fit your needs.

• Make healthy lifestyle changes: Your insurer may reduce your premiums if you make improvements to your health, like if you quit smoking (usually for at least 12 months). In this case, you’ll need to request a re-assessment.

• Choose a longer waiting period: Generally speaking, the longer your waiting period the lower your premiums. Keep in mind you won’t be able to claim during this waiting period.

• Consider age-stepped premiums: Age-stepped premiums start off lower and increase as you age. You may find this beneficial, especially if your income grows as you get older.

• Opt out of indexation: Some policies automatically increase your benefit amount to keep up with inflation. This usually means your premiums increase each year. If your current level of coverage is sufficient, you might be able to opt out of this indexation.

• Negotiate with your provider: If you’re thinking of switching, contact your current provider and see if it’s willing to negotiate to keep you as a customer.

• Suspend your cover when appropriate: There may be times when you don’t need coverage from your policy, like when you’re unemployed or on maternity leave. Instead of outright cancelling the policy, you may be able to suspend your coverage for a period of time. That way you can save on premiums and keep your coverage intact.

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Why do women pay more for income protection?

Insurance premiums are generally calculated based on the risk the insurer associates with a policyholder, and gender is one factor taken into account. If an insurer charges women more on average for income protection insurance than men, this may be due to an assumed likelihood of women making a claim in the future, based on historical trends.

Is income protection insurance worth it?

If you’re off work, you’ve used up all of your sick leave, and you aren’t eligible for workers’ compensation, you could find yourself under financial strain. You’re likely to have expenses that keep coming regardless of whether or not you’re earning money, like utility bills and rent or home loan repayments.

Income protection insurance is designed to replace some of your income for a set period of time, so you can continue to meet most of your usual expenses while you recover. It’s different to Total and Permanent Disability (TPD) insurance, which is designed to protect people who become permanently unable to work due to an accident or illness.

How do I calculate how much income protection insurance I need?

To work out how much coverage you need out of your income protection insurance, add up your living expenses, including any current or future debt payments (like home loan, car loan, and credit card repayments). Do this during the quoting process, as many providers allow you to select your benefit amount.

It’s also worth checking if you already receive income protection insurance through your super fund and whether it’s sufficient for your needs. Premiums for income protection insurance provided through super are usually deducted from your super balance. While this can be good for cash flow, it may eat at your retirement savings.

How to pick the right income protection policy

When choosing an income protection policy, consider your own needs, as well as the needs of your dependants (if you have any). It’s important to also check if you already hold an income protection insurance policy as part of your super fund, and whether this policy offers enough cover.

If you’re interested in a direct income protection policy, you can compare income protection insurance with Canstar. Our comparison table lets you see a policy’s maximum benefit period and monthly benefit amount, as well as its Star Rating. This Star Rating is calculated by our expert researchers as part of the Direct Income Protection Star Ratings and Award. Providers offering outstanding value cover to working consumers are awarded a 5-Star Rating. You may want to consider these providers when comparing your options.

It’s also important to read the documentation, such as the Product Disclosure Statement (PDS) and Target Market Determination (TMD), for any policy you’re considering.

Is income protection insurance tax deductible?

Premiums for income protection insurance paid using your after-tax pay are typically tax deductible. If you pay for your income protection through your super fund you cannot claim these premiums as a tax deduction.

The benefits you receive from your income protection policy will be taxed and treated as regular income and must be included on your tax return. For more information, talk to a professional tax agent or visit the ATO website.

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