Breaking down some benefits of income protection insurance

If you want to protect your income and the life you’ve built for yourself and your family, you may want to consider income protection insurance. This type of insurance can provide various benefits in the event that you are unable to work due to sickness or injury.

The main protection offered is called a ‘benefit payment’, which is a regular monthly payment made to an insured person who is unable to work due to illness or injury. These payments cover a percentage of your pre-tax income and are paid for a specified benefit period or until you can return to work.

In addition to the benefit payments, some policies have additional inclusions – such as rehabilitation, and recurrent disability benefits. So, let’s break down some of the benefits of income protection insurance that you might come across and how to gain access to them.

What can income protection insurance be used for?

Income protection insurance in Australia is a financial product that can provide a safety net if you’re unable to work due to sickness or injury. The benefit payments received from a policy can be used to help cover everyday expenses like rent or mortgage, utility bills, groceries and more. Think of it as a way to maintain your lifestyle and support your family during a tough time.

Income protection insurance could also help to cover rehabilitation costs to support your long-term recovery. If you rely on your income to support your family i t can be a huge weight off your shoulders to know you have financial protection in place with a portion of your income paid if the unexpected happens and you’re unable to work due to sickness or injury.

Here’s some of the benefits of income protection insurance as well as some additional benefits you might not be aware of.

Benefit #1: Income benefit

If you get sick or injured and can't work, income protection insurance can help. You can receive monthly payments that are a portion of your regular pre-tax income, called an income benefit, after you’ve completed the required waiting period. The waiting period is the amount of time you must wait before your payments start. The income benefit can be paid for the duration of the benefit period or until you are able to return to work, whichever occurs first. The benefit period is how long the monthly payments will last if you remain unable to work due to your illness or injury. Most income protection policies offer a benefit period of two or five years, or up to a specific age.

Depending on the policy, you’ll usually need to hit certain criteria in order to qualify for this benefit. For example, your insurer may require that you are under the care of a doctor or be unable to earn an income from anywhere else. If you are eligible, you’ll start to receive your income benefit after the waiting period ends. Each income protection policy will have its own definition of partial or total disability that must be met for a claim to be eligible.

Benefit #2: Rehabilitation benefit

Some policies might include additional benefits beyond the income benefit. A rehabilitation benefit, for example, can be provided to help cover costs while you start your return to work. Depending on the policy you take out and your preferred insurer, it might be in addition to your regular income benefit payment.

Benefit #3: Benefit if your disability returns

Another benefit you might encounter with income protection is something often referred to as ‘recurrent disability’. This is a benefit that may continue the benefit payments without you having to complete the waiting period again if your sickness or injury recurs within a specific amount of time from the last claim payment, which will be outlined in your Product Disclosure Statement (PDS).

Be aware that depending on how much time has passed since you’ve returned to work, you might have to make a new claim and see out another waiting period.

Benefit #4: Death benefit

A death benefit is usually a one-time, lump-sum payment that’s paid out if you pass away while your policy is still active. If this benefit applies (subject to the insurer), it will be paid to whoever you’ve nominated as your beneficiary or to your legal representative, as allowed by the Life Insurance Act 1995.

Some things you should know

As with most insurance there are exclusions terms and conditions that will be applicable to the cover provided. Income protection insurance is designed to replace your income based on your annual earnings prior to your illness or injury therefore the amount of income benefit you receive will be dependent on income at time of claim. The benefit payments you receive may also be reduced by any other disability payments for your injury or sickness.

How to gain access to these benefits

It’s simply a matter of applying for an income protection insurance policy with your preferred insurer. If you meet the conditions of the policy, you can be financially protected if you're unable to work due to sickness or injury. It’s also a good idea to read the PDS and compare a range of income protection insurance policies so you can find one that's right for you.

If you’re considering protecting your lifestyle and looking into financial protection for you and your loved ones in the event of a sudden sickness or injury, you can compare a range of income protection insurance policies today with Choosi.


Choosi doesn’t compare all brands in the market. This information is general only; it doesn’t take into account your personal objectives, financial situation or needs and shouldn’t be relied upon as advice. You should consider the relevant Product Disclosure Statement (PDS) and Target Market Determination TMD) available on this website for more information and to ensure the product suits your needs. If you have legal, tax, or financial questions, you should consult an appropriate professional.