Income protection statistics

It may not be the most glamorous topic in the world, but when it comes to throwing you a lifeline when it matters, it really does pay to know about income protection insurance. Unfortunately, though, according to a recent Finder study, 58% of Australians are still in the dark about what income insurance covers, with many confused about whether redundancy and pregnancy are automatically included.

We've put together the key stats and facts about income protection insurance.

The main takeaways

• Less than half (42%) of participants could correctly identify what income protection covers. This is the equivalent of more than 11 million Australians.
• 17% of respondents falsely think that income protection will cover them if they get fired.
• 5% wrongly think income protection covers you for pregnancy.
• One in 10 Australians admit they don't even know what income protection is.
• One in 4 Australians (22%) think redundancy is automatically included in income protection plans. In reality, it's sometimes offered as an optional extra.

How well do you understand income protection?

Every month, we ask Australians how well they understand income protection. Throughout 2018- 2019, we found that only 37% said that they understand it quite well, but that was followed closely by many admitting that they only understand it a little bit (31%) and just 23% said they understand it perfectly.

Which of these do you think income protection covers you for?

One of the big questions over income protection insurance is what does it actually covers you for? Most (65%) people correctly know that income protection covers you if you're ill or injured and unable to work. Not all policies, in fact very few, will cover you for involuntary redundancy and most will not cover you if you get fired.

What we know by generation

The younger generations are more in the dark about income protection than older groups, with nearly two-thirds of generation Y unaware of what it covers. Here are some of the main takeaways from the survey, broken down by generation:

• Nearly two-thirds (65%) of generation Y are unaware of what income protection covers, compared to half (50%) of baby boomers.
• One in 4 millennials (22%) wrongly believe they are covered by income protection if they get fired.
• 23% of generation Z (ages 18-23) don't even know what income protection is, compared to 7% of generation X.
• 8% of generation Y wrongly believed it replaced lost earnings during pregnancy

Managing your income

What bill or expense causes you the most stress? We asked and got over 15,000 responses. Here's what you said.

It's not surprising to see mortgage and rent at the top of the list, since it's almost always our biggest expense. But for most of us, the stress isn't over paying our mortgage or any other expense for that matter; it's about not being able to pay for them. It's about the what-ifs, such as what if you fall ill, get injured or you lose your job. Income protection can't stop these things from happening, but it can pay the bills if they do.

What are the most common income insurance claims?

According to CommInsure, most income insurance claims are for accidents, not illnesses. Unlike workers compensation, income protection can cover you if you injure yourself inside or outside of work. Musculoskeletal and mental health claims were the second highest. Other conditions made up 60% of claims.

Frequently asked questions

• Is it worth having income protection insurance?

  Income protection can be worth it if you or your dependents rely on the income you earn and would suffer financially if you can't work due to an accident or illness. Income protection can protect you with regular payments of up to 70% of your gross salary until you're fit to return to work and some policies offer additional benefits to help you back on your feet.

• How much does income protection cover?

  Most income protection policies pay up to 70% of your pre-tax income. They also have a benefit period of two to five years and a maximum benefit, usually around $10,000 monthly.

• Can I have two income protection policies?

  Yes, you can have more than one income protection policy. In some cases, you'll be paying extra when you're unlikely to be able to claim the full benefit on both. Many insurers set a maximum benefit you can receive and this usually amounts to less than 100% of your income.