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What is income protection insurance?

Income protection is a product that pays you a regular cash amount if you are unable to work as the result of an accident or sudden illness. It covers up to 70% of your income for a set period of time (e.g. six months, until the age of 65).

This is an important product to consider if you’re unsure how you or your loved ones would manage financially if you couldn’t earn an income due to an unexpected injury or illness. For many people, debt repayments and living expenses would make it extremely difficult to stay afloat financially if something happened to them. With income protection, you can rest easy with the peace of mind that you could still receive up to 70% of your pre-tax income through monthly payments if injury or illness keeps you from working.

Why should I compare income protection insurance?

Not every income protection policy is the same; for example, they might have different insurance premiums, exclusions and benefit periods. It’s also important to note that not every provider pays the same percentage of your income when you make an income protection claim, so it’s worth shopping around for the best deal for you.

Comparing income protection through our comparison tool comes at no cost to you and is a great way to see policies from some of Australia’s biggest providers side-by-side to decide on the right level of cover for you.

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We’ve designed our service to let you explore a wide range of quotes, no matter whether you’re a high-income earner or a part-time worker.

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If you’ve got any questions when deciding on a policy, we can answer them either here on our website or over the phone.

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Learn about income protection insurance

Types of financial protection

There are many products that protect your income. Some of these are standard income protection, redundancy cover or mortgage protection insurance. Learn more here.

Can I claim income protection on tax?

If you buy income protection as a standalone policy, your premiums could be tax deductible (unless your policy is held through your superannuation fund). Find out more in this guide and speak to a financial advisor for more information.

The process for getting cover

We answer the three biggest questions you need to know for getting income protection cover: Do you need income protection, how do you apply and how do payouts work?

Redundancy cover

Redundancy insurance offers you a level of financial protection if you become unemployed involuntarily. This is different to standard income protection which doesn’t cover redundancy.

Frequently asked questions

How does income protection insurance work?

With income protection, you’ll be insured for up to 70% of your income through monthly benefits if you’re unable to work because of an injury, illness or certain medical conditions. These payments could help you maintain your quality of life or manage debt repayments while you’re unemployed.

The period of time that income protection covers you for is called your benefit period and can be either a set time (e.g. six months) or until you reach a certain age (e.g. until you turn 65).

Income protection is risk-rated, meaning that your income protection premiums will depend on several factors such as your age, gender, smoker status and occupation. You may also have some exclusions or loadings for specific medical conditions. For a complete list of policy terms and conditions, refer to the relevant Product Disclosure Statement (PDS).

What benefits should I look for in an income protection policy?

There are several benefits that can come built into your income protection policy. You’ll want to keep these in mind when comparing income protection policies. Here are a few common benefits you might want to consider when taking out income protection insurance:

  • Partial disability benefits. Allows you to make an insurance claim for a reduced percentage of your cover amount if you’re partially disabled and can still work at a lower capacity.
  • Recurrent claim benefits. Allows you to recommence your benefit payments without serving your waiting period if you claim for the same or a related condition within 12 months.
  • Death benefits. Pays out a lump sum to your chosen beneficiary if you pass away.

The benefits available to you will depend on your personal circumstances and will differ between providers.

What’s the difference between life insurance and income protection?

Unlike income protection (which insures your income if you can’t work temporarily), term life insurance policies insure your life by paying out a lump sum if you pass away or are diagnosed with a terminal illness.

Other types of life insurance, such as trauma insurance and total permanent disability (TPD) insurance, pay out if you go through a traumatic illness or injury, or become totally and permanently disabled. These types of life insurance have more in common with income insurance, but still differ in that they pay out a lump sum that’s separate from your income and employment.

Meet our Head for Health, Life and Income Protection Insurance, Lana Hambilton

Lana Hambilton understands the benefits of income protection insurance, particularly when we fall on difficult times. Like any insurance, life and income protection are there to support you and your loved ones when the unexpected happens. She is passionate about helping Australians understand their options and supporting them to navigate products to find the right one for their lifestyle and needs.

Lana has over 15 years’ combined experience in life, income protection and health insurance and insurance comparison industries. She’s also a Board Member of the Private Health Insurance Intermediaries Association.

Lana’s top tips for income protection insurance

  1. When searching for an income protection policy, always check the waiting periods that may apply should you make a claim. While choosing a longer waiting period can make your policy cheaper overall, only consider this option if you think you have enough savings or sick leave to cover you if you’re unable to work.
  2. Check the benefit period carefully when comparing income protection policies, as this will determine how long your monthly payments will be paid if you’re unable to work.
  3. While it’s possible to get income protection with your super fund, it’s always a good idea to weigh up your options to ensure you’re getting the best product available. For certain incomes and insurance needs, protection within a superannuation account will be most beneficial, while a separate policy will be better for others.
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