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Income Protection Insurance In Australia

Income protection insurance is offered to people who stay in Australia and this type of insurance protects people who are either self employed or work for an employer. Income plans ensure that the policy holder does not have to worry about money when he is unable due to work due to being injured or illness. While most of these plans protect 75% of the policy holder’s annual income, some plans offer an additional 8% protection provided the policy holder has certain additional benefits such as retirement benefits.

Buyers who opt for this type of insurance plan are offered protection for a limited time frame and this is known as the benefit period. If the buyer opts for a flexible plan then he will have the option to choose the protection period. Usually cheaper plans do not offer many options since they are not flexible. Buyers who opt for better plans usually have the option to opt for additional perks for a nominal fee. Some of the perks that may be offered in addition to basic protection include surgery benefits and a death benefit.

Before enjoying the benefits of income protection plans, the policy holder has to wait for a number of days or months, this is known as the waiting or cooling off period. Policy holders have the option to choose if they want to wait for a few days, a few months or a year before they get the first monthly payment after filing a claim. Although buyers can save up to 20% by waiting for a longer time, this also means that they cannot enjoy the benefits offered till the waiting period is over.

Based on the amount given to the buyers after a claim is filed, income plans can be categorized into indemnity contracts and agreed value contracts. Indemnity contracts are usually cheaper since the insurance company decides the amount that should be given to the buyer based on various factors such as the buyer’s current financial status. Agreed value contracts on the other hand ensure that the buyer receives a fixed amount of money that doesn’t depend on his current financial status. These plans can also be further categorized depending on the tenure of the policy. Long term contracts are valid for 15 years or more where as short term contracts are valid for 10 years or less.

Before deciding the insured amount and cooling off period of the selected income protection insurance plan, buyers should consider both their financial status and personal status so that they can get a policy that truly protects them when they need help the most.


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Income protection is a crucial part of any comprehensive financial plan. If you’d like some help customising the correct policy for you, or want to know more about the income protection insurance benefits.