The basics
- Benefit: a monthly payment of part of your income while you can’t work because of illness or injury. Since APRA’s 2021 changes, new policies generally cap long-term benefits at 70% of your income.
- Waiting period: how long you must be off work before payments start (commonly 30, 60 or 90 days). Longer waiting periods usually mean lower premiums.
- Benefit period: how long payments can continue, for example 2 years, 5 years or to age 65.
Inside or outside super?
| Inside super | Outside super | |
|---|---|---|
| Who pays | Premiums come from your super balance | You pay from your own money |
| Tax | No personal deduction | Premiums are generally tax-deductible; benefits are taxable |
| Features | Often simpler cover and shorter benefit periods | Can offer more features, at a cost |
| Watch out | Cover can stop if the account is inactive or low | Cash-flow cost each year |
Questions to ask
- What does the policy count as my income, and how is it checked at claim time?
- What happens if I can work part-time while recovering?
- Are there exclusions, for example for a pre-existing condition?
- Do I already have cover through my super fund? Check before buying more.
Answer health questions honestly. Leaving things out can mean a claim is refused. See our insurance advice page and the insurance picture book.
Want this applied to your situation? Book a no-obligation chat with our team on Edward Street.
Quick answers
How much does income protection pay?
New policies generally pay up to 70% of your income over the long term, subject to the policy terms.
Is income protection tax-deductible?
Premiums for cover held outside super are generally tax-deductible, and benefits are taxed as income. Premiums paid from super are not personally deductible.
Sources
- Moneysmart: Income protection
- ATO: Income protection deductions
- APRA: Individual disability income insurance
General advice warning. This article is general information only and does not take into account your objectives, financial situation or needs. Rules and thresholds change; check the sources above. Past performance is not a reliable indicator of future performance. Consider the relevant PDS and our Financial Services Guide and seek personal advice before acting. FinForce is authorised under Financial Force Pty Ltd AFSL 238337. Shay has been authorised since 18 October 2011.