This video shows how underinsured Australians are – statistics show while 83% of us get more than just CTP insurance for our car, only 31% of Aussies get insurance to protect their income:
Source: Zurich Insurance Group
The table below shows some of our best life insurance options available for a non-smoking female aged 30-39 years old, who is working in a white collar occupation group such as a clerk or office administrator. This table is sorted by Star Rating (highest to lowest).
What is income protection?
Income protection cover offers to pay you a monthly benefit if you are unable to work for a certain period of time because of illness or injury. This insures you for a set level of your income (commonly 75% of your gross salary) and will pay you at that level until you are able to return to work or for the agreed period of time – whichever is sooner
Income protection insurance is not to be confused with redundancy insurance, which offers limited financial protection in the case of involuntary redundancy.
When choosing an income protection policy either direct from an insurer or through your financial adviser, you will need to decide a few important things:
The waiting period
Typically, income protection policies will have a waiting period – a period of time that you must be off work before the insurance cover kicks in.
This waiting period can range from 2 weeks to 2 years, so the key question to ask yourself is, how long could you afford to be without an income? For those with plenty of savings tucked away, or long service leave waiting to be taken, perhaps a 3-month waiting period could suit. For those with a large mortgage and no cash savings buffer, choosing the shortest waiting period possible will be necessary.
The length of the waiting period will affect the cost of the insurance. In general, the shorter the waiting period, the more expensive the insurance premiums will be.
The payment period
Income protection policies will only continue to cover your lost salary for a certain length of time and it is up to you to decide what length of time this should be.
Typically, you may choose a specific length of time, such as 2 years or 5 years, or nominate payments to continue until a certain age (such as 65 years old). The length of benefit period will also affect the cost of your insurance: the longer the benefit period, the more expensive the insurance premiums will be.
Choosing a provider
Some companies will insure 75% of your total package including your usual superannuation contributions. Others will cover 75% of your salary and pay 100% of your usual super contributions into your super fund.
Your financial adviser will be able to help you decide on the most suitable policies and providers for you. In the meantime, you can get some background knowledge on how providers compare on our website:
How much does income protection insurance cost through an adviser?
Obviously the cost depends on whether you choose to get income protection insurance as part of a packaged life insurance bundle through a financial adviser, or direct from a provider.
The following premiums for income protection through a financial adviser are current as at our 2016 Advised Life Insurance star ratings. Monthly premiums have been rounded to the nearest dollar.
|Income Protection (Male – Stepped)
Monthly Premiums ($/month)
|Income Protection (Female – Stepped)
Monthly Premiums ($/month)
|Source: www.canstar.com.au. Average premiums current as at 17 August 2016. Average premiums have been rounded to the nearest dollar.|
It?s important to note that the premiums on income protection insurance policies that you hold personally (as opposed to policies held within your superannuation fund) are a tax-deductible expense for many people. While each person should check the ATO website when filling in their tax return, this tax deduction could be worth claiming. Sadly, the same is generally not true of your other life insurance or health insurance policies.
To find out more about getting income protection insurance from a financial adviser and to compare your options, read our annual Advised Life Insurance Star Ratings report.