Have you ever considered how you'd manage if you lost your income due to illness or injury? We rely on our income to pay the bills, look after our family and enjoy life. It is one of our most important assets, yet past studies have shown that only 31% of Australians have income protection insurance in place to protect it*.

Income protection insurance helps to safeguard your income with regular monthly payments if you can’t work due to illness or injury, minimising the financial burden and stress while you’re recovering.  You can put the payments towards whatever you need to keep your life moving, including bills, household expenses, medical fees or mortgage payments.

Here are our top 10 tips for buying income protection insurance.


  1. Check if you are covered already. You may have income protection insurance as part of your superannuation or current employment package.  If you do, it’s worth making sure that the amount you’re covered for would be enough to cover your regular outgoings, as well as any medical or rehabilitation costs.

  2. Compare policies and consider what’s right for you. What you get varies by policy, and everyone’s situation is different. Look at features and benefits, what’s covered (and not covered), and differences in the definition of ‘disability’.

  3. Consider if a stepped or level premium is right for you. Stepped premiums are usually lower than level premiums when a policy starts, and then increase as you get older. Level premiums are usually higher at the start of your policy, but they don’t increase with age. Unsure which is right for you? Check out ASIC Money Smart for more on the difference between stepped and level premiums.

  4. Consider the waiting period that you choose. There will be a waiting period before you make a claim, usually 30 to 90 days. When choosing your waiting period, take into account your annual and sick leave balances, plus any savings that you could get access to straight away. Choosing a longer waiting period will generally reduce your premium.

  5. Consider how long payments will continue for. Depending on the policy, payments may continue up to 65 years if the disability is ongoing or permanent.  A benefit period up to 2 years is the most common.  Choosing a shorter benefit period will generally reduce your premium.

  6. Think about your family circumstances. Are you planning on taking parental leave? Some policies come with the option to take a break in your premium payments if you’re on parental leave or involuntarily unemployed. This allows you to keep your cover whilst you’re not earning an income.

  7. Check if you get a break from paying premiums whilst you are on claim and receiving benefits. This will give you peace of mind in the event you need to claim.

  8. Get money back at tax time. Income protection insurance is generally tax deductible if you take it out separate to your superannuation. It’s also worth considering that the proceeds received upon lodgement of a successful claim are generally tax assessable.

  9. Take advantage of joint policy discounts. It makes sense to review your cover with your partner, and look for joint policy discounts when you both take out cover on the same policy.

  10. Consider if you need other types of life or accident insurance as well. Do you have enough life insurance cover? Check out our life insurance Underinsurance Fact Sheet for helpful tips, and use the handy calculators to help you work out the level of cover to protect your lifestyle.

Find out more about RAC Income Protection Insurance. 




*2006 NS/IFSA study ‘Investigating Income Protection in Australia’.

This information is current as at 10 April 2017 and may be subject to change. This provides general information only without taking into account the personal circumstances of any individual and is not intended as financial, tax, health or other advice. You should consider the Product Disclosure Statement in deciding whether to acquire or continue to hold a financial product.
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