Key takeaways
- Income protection can help pay your bills if you cannot work due to a sudden illness or injury.
- Income protection is super valuable if you do not have emergency savings.
- Even with savings, income protection may be important if you rely on a single income, have debts or are self-employed.
What does income protection offer me?
Income protection is an insurance policy you can take out that will pay you part of your income if you're unable to work because of getting sick or injured. Generally, income protection can pay out:
- Up to 90% of your income for the first 6 months after you stop working
- Up to 70% of you income after the first 6 months are over, up to your elected benefit period
Every fund offers different benefits and definitions of full and partial disability, which will affect what you can claim. Be sure to read the Product Disclosure Statement (PDS) carefully.
Finder survey: How many Australians have income protection insurance?
Response | |
---|---|
I don't have any of the above insurance | 60.54% |
Life insurance | 32.52% |
Income protection insurance | 18.38% |
TPD insurance | 14.32% |
When income protection is worth it
Put simply, if you would be in financial stress if you stopped earning your income today, you could probably benefit from income protection. This will be more likely if you have dependencies, debts, or if you rely on a single income. Here are a few examples:
- You have rent or mortgage repayments you couldn't cover without your salary
- You have a spouse, children or other dependants that rely on your salary
- You don't have enough savings to cover more than a few weeks of your regular expenses
- You're a sole trader or casual worker, without access to leave or paid time off
- You want the security of not having to rush going back to work if you're sick or injured
When income protection might not be worth it
There are few times when you might not need income protection.
No expenses of dependencies: If you have low or no expenses, dependencies or debts, you might not need income protection insurance.
Close to retirement: If you've only few more years in the workforce and have enough savings, your response to sickness or injury might just be to retire early.
Low salary: Income protection is most useful to people earning a lot. If you're on a low salary, you might not benefit from income protection. You could look at Total & Permanent Disability insurance instead, whichpays out if you become permanently unable to work, regardless of earnings.
These aren't the only groups who might not need income protection, and you may still benefit if you fall into one of these categories. You should speak to a licensed financial planner before making any a decision.
![Nicole Kelly's headshot](https://www.finder.com.au/finder-au/wp-uploads/2024/08/NicoleKelly_Supplied_600x600.jpg)
"If you incur expenses for medical reports required to support your income protection insurance claim, these costs can be tax-deductible. This includes any fees paid to obtain documentation proving your inability to work due to illness or injury. Make sure to keep all receipts and records of these expenses to claim them when filing your tax return."
How much savings do you need to not need income protection?
Unfortunately, Finder research finds most Australians have far less than 3 month's earnings in their savings. According to Finder's Consumer Sentiment Tracker data from July 2023, around 60% of Aussies have less than 3 months of savings. The full data is in the chart below.
Compare policies from Australian income protection brands
![Sarah Megginson's headshot](https://www.finder.com.au/finder-au/wp-uploads/2023/10/Sarah-Megginson_2023_600x600.jpg)
"My income protection policy is an insurance I hope I never have to claim on – I consider it to be a financial back-up in case something terrible happens. Is it essential? Probably not, but hopefully it will provide my family with some financial breathing space if and when we ever need it."
Frequently asked questions
More guides on Finder
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Self-employed income protection insurance
Read our guide to the various types of insurance available to the self-employed.
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Can you have multiple income protection policies?
If you have more than one income protection policy they will both pay out – but don't expect to "double dip".
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Income protection and pregnancy
Income protection provides you with income replacement for sickness and illness but not for pregnancy. However, it does offer features to help you out during pregnancy.
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Income protection insurance for entrepreneurs
Running a small business? Find out how to get income protection to protect your own salary in case you get injured or fall ill.
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Expat income protection insurance
Income Protection can cover your income in case anything happens to you while travelling overseas, some conditions apply.
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Life insurance vs income protection insurance
Life insurance and income protection serve two different purposes but can both offer valuable cover alone and when combined.
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Income protection and tax (ATO rules)
Income protection insurance are generally tax-deductible, so read on to find out when premiums are tax-deductible and how much you can claim.
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NobleOak Disability Income Insurance Review
NobleOak has been offering personal insurance solutions direct to Australians for over 137 years. Discover the benefits and features available on the NobleOak Income Protection policy and make a secure enquiry for cover.
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OnePath Income Protection Review
Compare income protection policies available from OnePath and receive a secure quote from an insurance consultant. Find out how OnePath compares to other insurers.
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The best income protection. Boring, but worth it.
Looking for the best income protection insurance but not exactly sure where to start? Compare the Finder Awards 2023 insurance winners.