The Best Income Protection Insurance in Australia

Published: October 30, 2019

If you’re searching for the best income protection insurance in Australia, you might want to compare policies that meet your budget and unique requirements.

Income protection insurance pays you a monthly benefit, generally up to 75% of your pre-disability income, if you’re unable to work due to an illness or injury. Usually, the best income protection policy will offer you a choice of benefit and waiting period, and provide enough coverage to help you pay for living expenses while you recover.

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Is income protection worth it?

Your biggest asset is your income which enables you to support yourself and your family, while also saving for retirement. The loss of future earnings through disability could have a significant impact on your life. You generally need income protection cover when you start working, so you can continue to provide for your future living expenses.

Income protection insurance is generally worth it if you:

  • Are self-employed or own a business. You might not have employee benefits, such as sick pay and annual leave, should something go wrong.
  • Have a lot of ongoing payments, for example, a mortgage and a car loan, but little savings.
  • Have a family to support.

Compare income protection policies

Income protection brand Maximum monthly benefit Waiting period Benefit period
AIA Up to 75% 14 days, 30 days, 60 days 90 days, 1 or 2 years 2 years, 5 years, up to your age 65 or 70
Up to 80% 14 days, 30 days, 60 days 90 days, 180 days, 1 or 2 years 2 years, 5 years, up to your age 55, 65, 70 or 80
Up to 75% 14 days, 30 days, 60 days 90 days, 180 days, 1 or 2 years 2 years, 5 years, up to your age 60, 65 or 70
Up to 75% 14 days, 30 days, 60 days 90 days, 180 days, 1 or 2 years 2 years, 5 years, up to your age 60, 65 or 70
Up to 75% 14 days, 30 days, 60 days 90 days, 1 or 2 years 2 years, 5 years, up to your age 65 or 70
Up to 75% 28 days, 8 weeks, 13 weeks, 26 week, 1 or 2 years 2 years, 5 years, up to your age 65 or 70
Up to 80% 14 days, 30 days, 60 days 90 days, 180 days, 1 or 2 years 2 years, 6 years, 10 years, up to your age 55, 60, 65, or 70
Up to 75% 14 days, 30 days, 60 days, 13 weeks, 1 or 2 years. 1 year, 2 years, 5 years, up to your age 65 or 70
Up to 75% 14 days, 30 days, 60 days 90 days, 180 days, 1 or 2 years 2 years, 5 years, up to your age 65 or 70
Source: Respective companies product disclosure statements (PDS) as at 25 October 2019.

Take note: The above companies are a list of 9 retail insurance brands we currently compare. Certain benefit amount, waiting periods and benefit periods are only applicable to specific income protection policy options and occupational categories.

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Income protection insurance reviews

Below is a quick summary of the 9 retail insurance brands we compare and the income protection policies they provide.

AIA_Australia-90

AIA Priority Protection – Income protection

Provides worldwide cover, 24 hours a day, and you can choose to enhance your policy by selecting either Advantage Optional or PLUS Optional. However, if you're on a tight budget, you can choose an Income Protection Accident Only policy.

Employees who are not working full-time might qualify for an Income Protection Essentials policy.

Should you be made redundant, AIA will waive your premiums for up to 3 months when you meet their definition of Involuntary Unemployed.

BT-90

BT Protection Plans – Income protection

With BT you can choose a Standard Income Protection policy or their Income Protection Plus, which is more comprehensive and includes additional benefits.

If you've held cover for at least 6 months, you're allowed to suspend your policy once in any 12 months period for a maximum of 12 months. This suspension is valid should you become unemployed, take maternity leave, sabbatical or if your household income reduced by 30% or more in the last 3 months.

Under BT’s General income protection cover held inside Super or SMSF, your policy will continue if you keep paying premiums should you become unemployed or take parental or sabbatical leave.

ClearView-90

ClearView LifeSolutions - Income protection

ClearView offers two income protection policy options; Income Protection Cover and Income Protection Plus Cover.

You have the built-in benefit to waive your premiums while involuntary unemployed, while on parental leave or for a specific medical condition.

ClearView might waive your waiting period should you be totally disabled, unlikely to ever engage in your full-time occupation. For example, profound loss of hearing, paralysis or Motor Neuron Disease.

CommInsure-90

CommInsure Protection – Income Protection

CommInsurre offers a range of income protection policies, including Essential Cover for accidents only, Income Care for basic protection, Income Care Plus providing additional benefits for an extra fee, Income Care Platinum with more flexible waiting periods and Income Protection for inside super or under your SMSF.

You generally won't have to meet your waiting period if you claim for a specific medical condition. You can generally also extend your income protection by 5 years.

MLC-90

MLC Insurance – Income Protection

With MLC you have the choice of Income Protection Platinum (their highest level of coverage), Income Protection (the standard option) and Income Protection – Special Risk (protection for people in hazardous occupations).

MLC income protection provides benefits up to $60,000 per month for people between the ages of 19 and 55.

NEOS

NEOS – Income Protection

Choose between NEOS Income Protection Standard that provides basic benefits or Income Protection Plus, which is their top-level cover and includes a full range of benefits. Alternatively, you can also purchase Income Protection Super.

Depending on the policy you choose, you can have up to 3 months premiums waived when you go on parental leave or become involuntarily unemployed.

OnePath

OnePath OneCare – Income Secure Cover

Tailor your cover by choosing a policy that meets your requirements; Essentials (covers all occupations), Standard (all occupations, excluding 'R), Comprehensive (added benefits on top of Standard) and Professional (cover for specific white-collar occupations). You can also take out cover through Super.

Except for inside-super options and Basic cover, OnePath will generally continue to provide cover when you're unemployed for up to 12 months, depending on your terms and conditions

TAL-90

TAL Accelerated Protection – Income Protection

TAL gives you the choice of Income Protection Standard and Income Protection Premier, which is their comprehensive plan with a full range of benefits. Income Protection Super is also available.

With the Premier option, you can have your premiums waived for up to 3 months if you become involuntarily unemployed, and you will continue to be covered during this period.

Zurich-90

Zurich Wealth Protection – Income Protector

Two levels of cover are available, including Zurich Income Protection (cost-effective with basic benefits) an Income Protector Plus (includes the full suite of benefits).

As a built-in feature, you can reduce your 1- or 2-year waiting period to 90 days or 1 year if you've left your employer and consequently your salary continuance cover ended.

Excluding Specific Risk occupations, Zurich will waive your premiums for up to 3 months should you be involuntarily unemployed due to retrenchments, redundancy or employer insolvency.

How to find the best and cheapest income protection

When deciding which income protection policy is right for you, it’s important to carefully review the insurer’s PDS. We’ve listed the 7 fundamental questions be answered to help you decide whether the cover meets your requirements and budget.

Step 1. Choose your income protection policy type

The income protection policy type you choose will influence how much your policy will cost and the monthly benefit you can expect to receive:

  • Agreed value: More expensive premiums. Provides more assurance as your benefit is usually calculated on your income at the time of application. Generally, agreed value is better suited to people with fluctuating incomes, for example, small business owners and the self-employed.
  • Indemnity value: Cheaper premiums. Your monthly benefit is based on the proof of income provided at claim time, meaning if your salary reduced in the last couple of months, so might your benefit amount. Indemnity cover might be better suited to people with stable incomes.
  • Guaranteed agreed value: Offered by select insurers. Once your income is approved at application time, your monthly benefit is guaranteed by the insurance company.

Step 2. Determine your monthly benefit (benefit amount)

Most insurers provide cover for up to 75% of your regular income. However, select companies might offer you the option to increase your monthly benefit.

Step 3. Decide how long you want your income to be replaced for (benefit period)

Find out the maximum length of time the insurer will pay your monthly benefit, for example, 2 to 5 years or up to your age 65. Generally, the longer your chosen benefit period, the more expensive your premiums. Try to choose a benefit period based on:

  • How dangerous your occupation and/or lifestyle is,
  • How long you and your dependents will be able to sustain your current lifestyle without your income,
  • Your retirement age,
  • The probability that you’ll become sick or injured to such an extent that you won't be able to return to work.

Step 4. Determine how long you’re able to wait before benefits start (waiting period)

Your waiting period is the amount of time you'll have to be off work due to your accident or illness before you start to accumulate benefits. Depending on your insurer, you'll usually have a choice of waiting period, from 14 days, up to 2 years. Typically, the longer your waiting period, the cheaper your premiums.

Step 5. Select a premium structure

Depending on the insurer you choose, you generally have a choice of which income protection premium will best suit your budget:

  • Level premiums: Generally, more expensive at the beginning, but does not increase with your age.
  • Stepped premiums: Usually starts off cheaper but increases every year while your cover amount remains the same.
  • Optimum/hybrid premiums: Start on a higher than usual stepped premium structure, increasing yearly, but converts to level premiums when reaching a predetermined price.

Step 6. Find out which benefits are built into your policy

The best value income protection insurance usually includes a list of built-in advantages that add to the overall quality of your policy. For example, the premium waiver benefit, specific injury benefit, rehabilitation and accommodation benefit and the suspending of cover benefit.

Generally, you might also have the option to add additional features for an extra fee. For example, the day 1 accident benefit, increasing claims option and the lump sum benefit option. This is usually applied to the Plus income protection policy types.

Step 7. Understand your income protection definition

A company generally pays an income protection claim depending on your total disablement definition when you’re unable to work following the advice of a medical practitioner. Select insurer’s may provide you with a choice of how you want your claim to be assessed. The three-tier definition generally means you can prove that you are disabled by fulfilling one of the below:

  • Duties based: You’re unable to perform one or more of the income-producing functions essential to your specific occupation.
  • Hours based: You’re incapable of working at least 10 hours per week in your regular occupation, and you're not working in any other gainful employment.
  • Income-based: You’re not able to earn more than 20% of your pre-disability earnings.

What does a good income protection policy look like?

The best value income protection policy generally:

  • Protects you from a long list of accidents and sicknesses,
  • Clearly defines what is considered a disability,
  • Provides you with the maximum cover amount you need to continue your lifestyle,
  • Covers you for the length of time you want (benefit period),
  • Gives you a choice of waiting periods suited your budget and requirements,
  • Offers affordable premiums,
  • Includes a list of built-in benefits and provides extra features you can add to tailor your cover.
  • Waives premiums when involuntarily unemployed, on parental leave or while a claim is being paid.

Frequently asked questions and answers

What’s the best income protection for redundancy?

Generally, income protection policies do not pay a benefit when involuntary unemployed. However, select insurers might waive premiums up to a few months while you look for alternative work. Redundancy insurance is only available from select companies.

What's the top income protection for self-employed?

Self-employed Australians generally do not have fixed salaries, which is why an Agreed Value policy might suit you best. Many self-employed Australians prefer income protection from insurers offering the 3-tier disability definition:

  • Duties-based: You're not able to perform the income-producing duties essential to your occupation.
  • Hours-based: Because of a sickness or accident you're working in a reduced capacity – less than 10 hours per week.
  • Income-based: Focuses on the reduction in income suffered because of your illness or injury.

What is the best income protection for doctor's?

Income protection insurance for doctors should generally be chosen based on the insurer’s definition of a claimable event. Select insurers let you decide which of the 3 tier definitions (duties, hours or income-based) is most applicable to your situation.

You might also want to look for a policy offering needlestick coverage, which provides you protection should you be accidentally exposed to HIV, Hepatitis B or C during your medical duties.

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