Income protection for over 50s Australians

What is income protection?

Income protection is a type of insurance that pays a benefit if you need to take time off work due to a sudden injury or illness. Most policies will pay up to 70% of your pre-tax income, which is paid in regular installments, usually monthly. These policies will have a maximum benefit, which is typically around $10,000 monthly.

The benefit payouts from income protection insurance can help you meet regular expenses, and also maintain your family's lifestyle while you focus on your recovery.

Can you get income protection insurance if you're over 50yrs-old?

Yes, you can, but there are limitations as you get older. The maximum entry age for income protection insurance is generally 59 or 60. If you're over 60 it can be a lot more difficult to be accepted, and only a handful of insurers we've found will let you take out a policy after you turn 60.

It's likely that you'll have to pay higher premiums than if you were younger. This is because as you get older you're statistically more likely to suffer health conditions, and insurers factor that risk into your premiums. If you have any pre-existing condition, you will also likely have to pay more. In some cases, that condition may be excluded from your cover altogether. This means that if you become ill with that pre-existing condition, you won't be able to claim it on your income protection policy.

If you're fit and healthy, it's likely you'll be able to find an affordable income protection policy. However, be aware that that age can present challenges, and can lead to higher premiums the older you are.

What should over 50s look out for when looking for an income protection policy?

Here are some important things to consider if you're in your 50s while you're looking for an income protection policy:

• Expiry age: Income protection insurance will generally have a set age where your policy will expire and you'll no longer be entitled to your benefits. This is commonly around 65 or 70. It's important to understand this, as it affects how long you can rely on the policy to replace your income if you get injured or ill.
• Maximum entry age: Every policy will have its own maximum entry age. Knowing this is essential, as it can limit your options or prevent you obtaining cover as you reach older ages.
  Every policy will have its own maximum entry age. Knowing this is essential, as it tells .
• Pre-existing medical conditions: Each policy will treat pre-existing conditions differently. Some may exclude yours from the claimable events on your policy, cover the condition for a higher premium, or deny you cover entirely.
• Waiting period: Consider how long you'll have to wait before your benefits kick in after you first become injured or ill. A longer waiting period can mean more affordable premiums, but it can leave you without any financial support if you're out of work for an extended period.
• Benefit amount: This refers to how long you'll receive payments if you make a claim. Consider how close to retirement you are. A longer benefit period might not make sense if you only plan to work a few more years.
• Stepped vs level premiums: Stepped premiums will start lower, but increase as you age. While level premiums will stay the same for the life of your policy, which can make more sense if you plan to be covered for a long time.
• Crisis planning features: Look for policies with options that allow you to pause or suspend your cover. This gives you the flexibility to not worry about premium payments if you are in the middle of financial hardship or need to allocate your budget elsewhere.
• Your inclusions and exclusions: Carefully review the inclusions, such as additional benefits for critical illnesses, rehabilitation support, or coverage for specific occupations. Equally important are the exclusions, which may limit your ability to claim for certain conditions or situations, thus affecting the policy's overall effectiveness.

Every income protection policy will be slightly different. It's always a good idea to check the product disclosure statement (PDS) and the target market determination (TMD) documents of a policy. You'll get a complete idea of what is and isn't included, so you can fully understand what you're signing up for before purchasing a policy.

What affects the cost of income protection for over 50s?

The cost of your income protection policy is going to be unique to your personal situation. This is because insurers price your premiums based on how likely they think you are to make a claim. You'll also see your premiums shift according to some of the choices you make when buying an income protection policy.

Age: As you age, your risk of health issues will likely get higher. Insurers will price these into your premiums, which can be more expensive than what you'd see if you were younger.

Health status: Your health is a significant factor in your premium price. Any pre-existing medical conditions or serious health issues can significantly increase your premiums.

Occupation: If you have a high risk job or do physically demanding work like mining or construction, you may face higher premiums. This can be even more likely in your 50s as wear and tear on your body is more likely to take effect.

Lifestyle choices: Whether you're a smoker, engage in hazardous activities, or drink alcohol regularly can influence your premiums. People who live a riskier and less cautious lifestyle will generally be seen as higher risk by insurers

Cover amount and benefit period: Choosing a higher benefit on your policy will usually result in higher premiums. And the opposite is true for a lower benefit .

Waiting period: This is the time you'll have to wait before you can first make a claim. Longer waiting periods will typically have lower premiums, while shorter ones can lead to more expensive ones.

Claim indexation: Certain policies will have an indexation, which adjusts your benefits with inflation over time.

'Stepped' vs 'level' premiums: Generally, stepped premiums will start lower and increase over time. Level premiums will be higher to start, but stay the same for the life of the policy.

Insurance provider: Different insurers will have varying ways for assessing risk and pricing policies. Shopping around can help find more competitive rates, and some providers may offer better deals or discounts for similar coverage.

Alternatives to income protection insurance

Here are some alternatives to income protection insurance that can offer you and your loved ones financial security:

• Life cover or death cover: This provides a lump sum payment to the beneficiaries of your choosing if you pass away or are diagnosed with a terminal illness. This can help you cover any outstanding debts, like mortgages or loans, and make sure your loved ones have financial security during these difficult times.
• Total and permanent disability (TPD) insurance: As you get older, one incident can be more likely to turn into a serious condition. You'll get a lump sum payment if you're permanently unable to work from sickness or injury. You can use this to pay for living expenses and medical costs.
• Trauma insurance (critical illness insurance): Trauma insurance offers a lump sum payment in the event of a serious illness, such as cancer, heart attack, or stroke. As you get older, your risk of these conditions grow, and trauma cover can give you a financial safeguard.
• Funeral insurance: This provides a payout to cover funeral expenses if you pass away. As you start to think about estate planning and the second half of your life, having this insurance ensures your funeral costs won't be a burden to your surviving loved ones.

If you're still unsure what type of insurance is right for you, it's a good idea to speak with an insurance broker or financial adviser.

Compare income protection policies from Australia's top providers with Finder.

FAQs

• What's the maximum age I can take out an income insurance policy?

  In most cases, it's 59 or 60. It will generally be much harder to find an insurer willing to cover you after this time. If you already have an income protection policy, you can still be covered until you are 65, or, in some cases, as old as 70.

• Do I need income protection insurance if I'm in my 50s?

  If you still rely on your income to pay the bills, income protection insurance can be valuable. If you could get by fine without it – perhaps you have other sources of income – then it might not be necessary and you might want to consider other forms of life insurance. Death cover, total and permanent disability (TPD) insurance, or trauma cover can pay you and your family a large lump sum if you become critically ill or die.

• Can I get income protection after I turn 60?

  It's possible, but it can be a lot more difficult to find. We looked at 10 different income protection policies and only found 1 provider who offered a maximum entry age that exceeded 60. This was Aspect Insurance, which sets a maximum entry age of 65.

Written by

Cameron Thach

Insurance Content Writer

Cameron is the local insurance scholar at Finder. With a diverse background writing in independent education, web-3, and finance, his mission is to build helpful content and that speaks to readers in language they understand. See full bio