Understanding Income Protection

The risks

  • 2.6 million Australians aged under 65 are living with a physical disability[1]
  • Australians have a one in three chance of being diagnosed with cancer before age 75[2]
  • 690,000 Australians were injured at work between 2005 – 2006, with 43% not receiving any financial assistance[3]
  • More than 60% of Australians will be disabled for more than one month during their working life[4]
  • More than 25% of Australians will be disabled for more than three months during their working life[5]

The reality 

Without an income, mounting debts can cause additional stress. How long could you afford to cover your expenses without completely draining any savings safety net?

A health setback doesn’t have to affect your financial wellbeing. Income Protection insurance will compensate you for any time taken off work.

Some misconceptions

“I’ll be covered under workers compensation”

Workers compensation is limited. It only applies if you are injured during working hours or for illness directly resulting from your employment. It you’re self-employed, you may not even have this cover. 

“I can’t afford it”

Depending on how your policy is setup, Income Protection premiums may be tax deductible.

What is Income Protection Cover?

Income Protection can pay up to 75% of your income if you suffer an illness or injury. This money can help replace lost income whilst you recover.

Income Protection Features

Partial Payments: If you’re able to return to work part-time or in a reduced capacity, you may still receive a partial monthly payment.

Choice of waiting periods and benefit periods: Allows you to tailor cover to your specific situation.

Ancillary benefits: A range of additional benefits let you further tailor cover to your needs.

Jenny’s Story

Jenny (29) was enjoying a week’s holiday from her role as an investment analyst.  She and 3 of her friends had decided to visit the snow during the peak of the season.  While an accomplished skier, Jenny hadn’t considered the crowds of beginners on the slopes, in particular one new snow border that crashed into Jenny, sending her flying down a black run!

The combination of two broken ribs, a fractured pelvis and a punctured lung, extended Jenny’s absence from work from a week’s holiday to four months sick leave.  And because the accident hadn’t happened at work, Workers Compensation didn’t cover her.

Luckily, Jenny had taken out an Income Protection policy 12 months earlier.  She received the equivalent of 75% of her income for the 15 weeks she couldn’t work.  This allowed her to keep up with her rent and car payments without having to dip into her savings, or borrow from her parents. Provided by CommInsure Claims.

How can a financial adviser help?

No one plans to get sick, injured or to die prematurely, but you can take the opportunity right now to explore your options and make a conscious choice about your future, rather than leaving it to chance.

Putting your plan together is best accomplished with the help of a Risk Insurance Specialist. It may be the most significant step toward financial freedom you ever take.

[1] AIHW (2008) Australia’s health 2008, Cat. no. AUS 99, Canberra

[2] AIHW (2008) Cancer in Australia: an overview 2008, Cancer series no. 46, Cat. no. CAN 42, Canberra

[3] ABS (2007) Australian Social Trends 2007, Cat. no. 4102.0, Canberra

[4] Fabrizio, E (2007) Australia & NZ Disability Income Experience

[5] AIHW (2008) Cancer in Australia: an overview 2008, Cancer series no. 46, Cat. no. CAN 42, Canberra


The information contained on this website is for general information only and should not be relied upon unless you first discuss your circumstances with a Licenced Financial Planner.

The Authorised Representative of Alea Insurance Pty Ltd ACN 107 647 192 is Steve Wilson (AFSL No: 331367) who is licensed by ClearView Financial Advice Pty Ltd ACN 133 593 012.