How much does income protection insurance cost?

How much does direct income protection cost, and how can your occupation, age, gender and lifestyle choices affect your insurance premiums?

What affects the cost of income protection?

The cost of income protection insurance is influenced by a number of factors, including the policyholder’s age, gender, smoking status and occupation, with those in more physically demanding occupations generally seen to be at greater risk of illness or injury. This can mean higher premiums.

The insurer you choose can also affect the premiums you pay. As part of its 2020 Direct Income Protection Star Ratings and Awards, Canstar found that when averaged out across all consumer profiles considered, the Award-winning insurers’ monthly premiums were 11.5% ($32) cheaper than the average of all of the other insurers rated, at a $6,250 monthly sum insured amount.

Another factor that can impact the overall cost of income protection is how premiums are treated for tax purposes. The Australian Taxation Office (ATO) says you can claim the cost of insurance for loss of income on your tax return. However, it says this does not apply to policies that cover you for physical injuries, or to income protection cover taken out through superannuation. Consider seeking professional taxation advice if you’re in doubt about your situation.

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 of the factors taken into account. The perceived risk is typically based on previous claims statistics, suggesting that in the past women have been more likely to make a claim on their income protection than men. As the tables later in this article demonstrate, the difference in premiums between women and men can be significant.

How much does income protection cost?

To give you an idea of the potential cost of income protection cover, Canstar Research has calculated the average monthly premiums from our database for non-smoking male and female workers. The first table is for a 27-year-old and the second table is for a 52-year-old.

For the purposes of comparison, our Star Ratings consider $3,125 worth of cover per month (based on 75% of an annual income of $50,000), and $6,250 cover per month (based on 75% of an annual income of $100,000).

27-year-old non-smoker’s average premium cost for direct income protection

As you can see from the table below, income protection insurance is typically more expensive the more physical work is involved in an occupation, with cleaners and waiters facing higher premiums on average than accountants and receptionists, for example.

Average Monthly Premiums for a 27-year-old Non-Smoker by Occupation
Occupation Monthly Benefit of $3,125 Monthly Benefit of $6,250
Male Female Male Female
Accountant $43 $55 $83 $106
Car Mechanic $78 $101 $149 $191
Checkout Operator $76 $95 $148 $185
Chef $72 $93 $139 $178
Clerk $47 $60 $90 $115
Commercial Cleaner $84 $104 $162 $203
Electrician $78 $101 $149 $191
Receptionist $47 $60 $90 $115
Registered Nurse $64 $83 $120 $155
Retail Manager $48 $61 $91 $116
Sales Assistant $52 $66 $100 $125
Sales Representative $51 $63 $97 $121
Secondary School Teacher $54 $71 $104 $134
Store Person $61 $77 $118 $149
Truck Driver $90 $113 $175 $219
Waiter $77 $96 $150 $187
Source: www.canstar.com.au. Based on quotes obtained for Canstar’s 2020 Direct Income Protection Star Ratings. Monthly benefit amounts of $3,125 and $6,250 are based on 75% of monthly income for an annual income of $50,000 and $100,000, respectively. Quotes are based on a 28 or 30 day waiting period and benefit period of 2 years.

52-year-old non-smoker’s average premium cost for direct income protection

As this table shows, income protection insurance typically becomes more expensive as you age.

Average Monthly Premiums for a 52-year-old Non-Smoker by Occupation
Occupation Monthly Benefit of $3,125 Monthly Benefit of $6,250
Male Female Male Female
Accountant $111 $162 $212 $310
Car Mechanic $209 $302 $396 $572
Checkout Operator $203 $290 $392 $562
Chef $191 $279 $365 $532
Clerk $122 $179 $232 $342
Commercial Cleaner $226 $321 $436 $622
Electrician $209 $302 $396 $572
Receptionist $122 $179 $232 $342
Registered Nurse $174 $251 $326 $471
Retail Manager $124 $182 $236 $347
Sales Assistant $137 $196 $261 $375
Sales Representative $132 $189 $252 $361
Secondary School Teacher $146 $213 $276 $404
Store Person $156 $227 $300 $438
Truck Driver $239 $343 $462 $664
Waiter $204 $291 $394 $565
Source: www.canstar.com.au. Based on quotes obtained for Canstar’s 2020 Direct Income Protection Star Ratings. Monthly benefit amounts of $3,125 and $6,250 are based on 75% of monthly income for an annual income of $50,000 and $100,000, respectively. Quotes are based on a 28 or 30 day waiting period and benefit period of 2 years.

Interested in income protection insurance? Start comparing providers below

The table below displays a snapshot of policies with links to providers’ websites, based on a non-smoking male aged between 30-39 years old, who works in trades and services. The results below are sorted by Star Rating, from highest to lowest. Before committing to any particular policy, check upfront with your provider and read the PDS to confirm whether it meets your needs.

Why income protection can be worth considering

If you’re off work, you’ve used up all of your sick leave or other available leave and you aren’t eligible for workers’ compensation, you could find yourself under financial strain. You are likely to have a range of expenses that keep coming regardless of whether you’re earning money or not, potentially amounting to thousands of dollars each month. Income protection is designed to replace some of your income so you can continue to cover as much of your usual expenses as possible.

How to pick the right income protection policy

How do you choose the right policy for your needs? To help you to assess your options, Canstar compared 16 policies from 14 providers as part of its 2020 Direct Income Protection Star Ratings and Awards. You can see what Star Rating each policy received in the consumer profile that most closely matches your needs in Canstar’s comparison tables.

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