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:
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.
| 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% |
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:
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.
"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."
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.
"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."
Income protection can be super valuable for when times get tough. Learn the basics with our beginners guide.
Looking to protect your income in case of a serious accident or illness? Consider getting combined sickness and accident insurance.
Find out why income protection is an important tool to combine with your entitled sick leave.
Does income protection provide the same thing as mortgage protection? Read on and compare.
Find out how you can benefit from income protection even if you have a pre-existing condition, and which providers will cover you.
One of the benefits of income protection insurance is that you may have the ability to claim a tax deduction on your premium benefits. Find out if the same rules apply for policies inside super.
What are the most dangerous jobs in Australia? Find out which industries pose the highest risk to their employees.
Learn the ins and outs of salary continuance insurance so you can decide if this type of cover suits your needs.
Find out how much your income protection insurance policy will pay out in the event of a claim. Receive quotes for income protection and apply securely.
Find out what an income protection waiting period actually is and how the longer you wait can impact your premiums and benefit payments.