6 Income Protection Insurance Benefits & Coverage Options

Did you just have a disability and unable to work? Maybe you had an accident or broke a limb. This could put you out of work for some time. How would you cope with the financial responsibilities? How would you pay for kid’s tuition fees and mortgage?

Purchasing income protection insurance has helped many workers who couldn’t work anymore to keep up with their financial obligations. The income protection insurance benefits can help you remain afloat (financially) even if you no longer work.

In this guide, we walk you through the major income protection insurance benefits and the extent of the coverage.

What is Income Protection Insurance?

Let us start by understanding what income protection insurance is. It is a type of insurance policy that pays the policyholder a regular income if the person couldn’t work because of a disability or sickness.

Note that you must be disabled or certified unable to work to reap the income protection insurance benefits. Otherwise, the coverage wouldn’t be able to cater for your finances while you are out of work.

Why Have Income Protection Insurance?

There are many other insurance policies out there. Why should you settle for income protection insurance?

Here are some of the reasons why you need to have income protection insurance:

Existing Debt

Do you have an existing debt? The chances are that you have unpaid mortgage and tuition fee for your kids.

What happens to those when you are unable to work? At most, your savings would be used to cover for those, but how long can that last?

That is why you need to start thinking of getting the Income Protection (IP) insurance to help pay those bills if you are out of work.

No Annual Leave

Does your workplace offer annual leave? If it does, the income protection insurance policy may not be for you. But if there is no annual leave or sick leave, you need the policy.

That way, you would be covered if you get sick along the line.

Do You have a Kind of Illness?

Do you have any illness, whether chronic or not? With that, it may become worse and your savings may be unable to cover for the treatment and other expenses.

Why not get the income protection insurance to cover you for serious illnesses?

You have Dependents

Do you have people that depend on you? It may be your spouse, parents or kids. These dependents rely on you to keep some of their financial obligations in check.

What happens when you are unable to work again because of a disability? That could mean zero income and they wouldn’t be better off for it.

With your income protection policy, your dependents will have steady income because your regular would be paid with the coverage.

How Does the Income Protection Insurance Work?

The policy works by providing steady or regular income while you are unable to work because of a disability.

Worthy of mentioning is that the policy becomes inactive when you get well and now able to get back to work. Come to think of it, that’s right because the essence of the policy is to cover you until you get back on your feet.

With that being said, here are some of the ways that the income protection insurance policy work:

Regular Income Payment

The policy pays you a regular income, which serves as a replacement for a part of your income. The income or payment is made only if you are disabled or sick and that condition prevents you from working.

Payment isn’t Immediate

One fact about the income protection insurance is that it doesn’t start paying out immediately. There is a waiting or deferred period, which is a number of weeks before payment starts.

Depending on the insurer, it can take anywhere between 4 and 26 weeks before the payout starts.

Check the Incapacity Terms

Do not be misled by the fact that income protection insurance benefits cover you for being unable to work. The terms of incapacitation differ by the insurance provider.

Also, the type of illnesses or medical conditions covered and the duration of your being unable to work are also worth checking.

Conditions for Policy’s Term

The income protection insurance also has some terms. Typically, it stops paying out when you become well again and fit to get back to work.

However, that is not the only way to determine when to stop income protection insurance. The policy can also expire after the predetermined duration, whether in the short or long-term.

In some cases, the income protection insurance becomes inactive when the policyholder dies. In that case, there is no one to directly pay the income so it ends.

Only a Portion of Your Income is Paid

One downside to the income protection policy is that it only pays a portion of your regular income. Depending on the insurance company, you can get between 50% and 60% of your regular income.

Benefits of Income Protection Insurance

Now, let us talk about some of the benefits or advantages of getting the income protection insurance. The income protection insurance benefits include:

1.    Customization Options

One of the income protection insurance benefits is that it can be customized or adjusted to your taste.

For example, you can opt to paying a higher premium so you can get more payouts. Paying a higher premium can also fast-track the payout duration.

2.    Regular Income in a Period of Uncertainty

When you are unable to work, your bills wouldn’t stop coming either. That is why you need the income protection insurance to pay some of your bills while you are unable to work.

3.    Tax-Deductibility

Your income protection insurance may not be subject to taxation. It is possible only if you stick to getting paid directly, rather than using superannuation.

4.    Long-Term Protection plus Short-Term Payouts

The flexibility of the income protection insurance benefits helps the policyholder to decide how things turn out.

For example, you can use the long-term protection to cover yourself up to the age of 65, especially if you are unable to work by then.

The short-term option helps you to pay for important and recurring bills, such as mortgage and tuition fees for the kids.

From both angles, you are covered, provided you pay your premiums.

5.    Income Protection Insurance Provides Additional Coverage

The policy provides additional coverage, especially one related to injury. For example, you may be able to use it to cover for elective surgery treatments, rehabilitation programs and transportation to the clinic.

6.    Suitable for Most Income Earners

The income protection insurance benefits are not limited to salary earners. Both employees and self-employed individuals/entrepreneurs can use to get some money paid to them when unable to work.


What Does Income Protection Cover You for?

Your income protection insurance covers for car loans, mortgage payments, tuition fees, and childcare costs.

How Long Does Income Protection Insurance Last?

The policy lasts until the policyholder is able to work again. However, the term of the policy may end when the policyholder dies or when the predetermined term runs out.

How Important is Income Protection Insurance?

Income protection insurance is important because it pays you a regular income, even when you are unable to work because of a disability.


The income protection insurance benefits are obvious and are an excellent way for policyholders to earn regular income when unable to work. Want to protect your income from the unexpected? Contact a reliable income protection insurance provider to buy the policy today.


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