Income Protection

Income Protection Insurance

Income protection insurance (also known as salary continuance or income replacement) provides a monthly payment to replace lost income if you are unable to work due to injury or sickness. It is designed to help you maintain a reasonable standard of living, whilst you are unable to earn your regular income because of disability.

Income protection insurance is a vital consideration for anyone who needs to work to earn a living. This may range from employees to self-employed people, small business owners and professionals whose income and lifestyle relies heavily on their ability to continue working.


Level of cover Generally, the maximum allowable cover is 75% of your gross wage.

Some policies will provide cover greater than 75%, but any additional amount must usually be paid into your superannuation fund.

Income Protection Benefit Period This is the maximum length of time that you can receive payments while you are not working.

You can select a benefit period from two years through to age 65.

The longer the benefit period, the higher the premium.

Income Protection Waiting Period This is the length of time between stopping work and when you can make a claim to start receiving payments.

You can select a waiting period of between 14 days and two years.

Payments will commence 30 days after the expiration of your waiting period.

The shorter the waiting period, the higher the premium.

Inside or outside of super Income protection can be offered through your superannuation fund or can be purchased as a stand-alone policy outside of superannuation.
Occupation rating The cost and availability of cover is directly related to your specific occupation.  Consideration will be given to any risks associated with your job and how much you work and whether you are part-time or casual.

Income protection is not available to people who are unemployed and may be paused if you go on some forms of extended leave such as unpaid leave and maternity leave.

Tax treatment Income protection premiums paid outside of Super are generally tax deductible, however, all payments received are considered income and are subject to tax at the recipient’s normal income tax rate.


Like other forms of insurance, there are two types of income protection policies available; Indemnity and Agreed Value.  The difference lies in how the insurance company works out how much to pay you when you claim.

We will assist you to understand the differences and work out which type of policy best suits your situation taking into account various factors including cost.  Your occupation and personal circumstances, such as being newly self-employed, can sometimes affect which type of policy you can apply for.  The table below explains the differences between the two.


Indemnity contract Each time you claim, you must furnish new proof of income in order that the payment continues to be within the original insured income limits.

Your income at claim time will determine how much you are paid.

If your income reduces in the future, you can only claim on the lower amount.

If your income increases in the future, the maximum you can be paid is the sum insured.Premiums are generally cheaper than an Agreed Value contract.Generally, salary continuance policies issued as part of the benefits of a superannuation member account are indemnity contracts.

Can be a cost effective way for salary earners in stable jobs to obtain income protection cover.

Agreed Value contract When you apply for cover, you provide documented evidence of how much you are earning.

At claim time, you do not generally need to prove your income.

When you claim, the sum insured determines how much you are paid.

If your income reduces in the future, you will still receive the higher amount.  If your income increases in the future, the maximum you can be paid is the sum insured.

Premiums are more expensive than an indemnity contract but provide more certainty around the benefits.


It is important to choose the right level of cover for you and your family’s needs.  You should think about:

  • Your financial commitments; what are they and how long will they last?
  • Whether you have ongoing loan repayments to cover?
  • Whether you will need to fund childcare or housekeeping costs?
  • Whether your spouse will continue to (or is able) work?
  • If you need the maximum level of cover, or if you have other financial resources to help cover expenses?
  • Affordability of the cover reflected on your income protection quote

What waiting period should I have?

A waiting period is like the ‘excess’ you pay on claims with other forms of insurance. The greater the ‘excess’ you can bear (benefits are not payable during this time) the lower the cost to your cover. To work out an appropriate waiting period, you will need to consider:

  • How much leave you have available (e.g. annual leave, sick leave, long service leave);
  • Whether you have savings that can be used to fund your expenses during the waiting period.

You need to weigh up how long you can go without income, against the cost of the premium for a shorter waiting period.

What benefit period should I have?

To work out an appropriate benefit period, you will need to consider:

  • Your financial commitments; what are they and how long will they last?
  • Whether you have ongoing loan repayments to cover and how long they will last?
  • At what age you intend to retire?
  • Whether your spouse (is able to) and will continue to work?

Other savings, such as superannuation, you have available to fund your future expenses?

You should also consider:

  • Stepped premiums increase each year according to your age and the likelihood that you will make a claim and therefore they increase significantly as you get older.

Level premiums are calculated based on your age when your cover starts. You can lock in a fixed rate for your insurance cover.

Initially, level rates are generally higher than stepped rates but over the life of the plan as stepped premiums increase, level premiums generally do not*. This may represent a significant saving, meaning you can maintain your premiums more easily as you get older.

*Level premiums are not guaranteed and may change in the future due to rate, CPI and policy fee increases. Level premiums can alter to stepped at various ages, please ensure you refer to the current PDS.

Typically ‘Level’ premiums are not available through a superannuation platform

Successful income protection claims may be affected by the quality of the product and insurer.

Claiming income protection through Super may result in greater restrictions than if held personally.