Unlike some other forms of insurance, income protection in super doesn’t come by default. Most funds will give you the option to add it on, which allows you to carefully consider if income protection through super is right for you. 

What is income protection in super?

Also sometimes known as salary continuance insurance, temporary salary continuance, or total but temporary disablement insurance, income protection is designed to help you in periods where you lose your income, but it’s not as straightforward as it may seem. You can only claim insurance in cases of illness or injury, not any other kind of disruption. It won’t cover you if you are made redundant for any other reasons outside your control.

It’s also important to note that income protection through super is also generally only applicable to those in permanent employment. Those who are unemployed, or working casually generally won’t receive any benefit from income protection insurance.

Most often, income protection insurance through super doesn’t come default, but there are super funds that will automatically include it. In that case, you can only claim income protection through one super account, even if you are paying for multiple insurance policies. You will also receive less if you are already receiving worker’s compensation or other payments as a result of your injury or disablement.

How does it compare to other types of insurance?

Most super funds come with two types of insurance automatically: Total and Permanent Disability (TPD) Insurance and life cover. Life cover will provide your loved ones with a lump sum payment if you die, which you can learn more about here.

TPD insurance is similar to income protection insurance in that it is paid if you are unable to work due to illness or injury. You can learn more about TPD insurance here.

The main difference between these two types of insurance is – To claim under TPD you need to be judged to never be able to work again, in which case a lump sum payment is paid out, ideally a large enough figure to compensate you for permeant loss of income. Whereas to claim under income protection, you just need to be judged to be currently unable to work, and a monthly benefit will be paid until you’re able to return to work, or at the end of the specified benefit period.

What level of cover can I get with income protection?

The amount of income protection insurance in super you can get will depend on several factors including your line of work and how dangerous it is, and this is a figure your insurance company will let you know during the process of obtaining the insurance. Usually up to 75% of your regular income although some insurers will go as high as 85%. You will generally receive a regular monthly payment for around 2 years, although you can opt for a longer payment period, most commonly 5 years or to age 65 for higher premiums.

The way insurance companies calculate your income and determine your benefit amount can be a little confusing. If you taper down your working hours and therefore your income as a response to injury or disability before claiming your insurance, that period could be taken into account in your income and could lower your payment amount. Similarly, people with variable incomes may find that their cover is based on recent income rather than a longer time frame which is potentially more accurate.

Even if you initially sign up for this type of insurance with a clear understanding of what you are paying for, big life events can change things in your cover, sometimes leaving you ineligible to claim. Major life events like a job change or purchasing a home should always prompt a review of your insurance to make sure you are still getting the best insurance for your circumstances.

How much will it cost?

The cost of income protection cover varies significantly from person to person depending on your occupation, age, smoker status and the insurer among other factors.
The average cost of income protection insurance in superannuation over the life of your super balance is $25,000, which might be worthwhile if you find yourself unable to work due to illness or injury.

It is also important to regularly assess the insurance that you have, both inside and outside of super to make sure you don’t have unnecessary or irrelevant cover and that it’s sufficient for your needs. Some people are automatically covered with income protection, but may not even be eligible to claim due to their work and for some people the level of cover is inadequate to cover their living expenses if a claimable event were to occur.

You can get a tailored quote comparison across the top insurers that can be placed in super here.

How soon can I claim income protection insurance?

If you become injured or disabled, you will want to claim income insurance right away, but there is a waiting period before the payments begin. Most default income protection policies will come with a waiting period before your payments of 90 days, although that period can be shortened with upgraded cover, typically to 60 or 30 days.

You can compare super insurance and get a better understanding of your options. Or fill in the ‘speak to an advisor’ contact form on this page and an advisor will be in touch to help you decide what the best option is for you.

Where can I get advice on income protection insurance?

Insurance within super can be complicated, and the right resources can help you decide what’s right for you. You can use our comparison tool to help you learn more about income protection within super, as well as other kinds of insurance. Access the comparison tool here.

Speaking with a financial advisor about your insurance needs can be very beneficial, they will be able go through an insurance analysis with you to help determine what type of cover and how much is appropriate for you. They can also do quote comparisons and use their industry knowledge to find the best insurer for your situation.

To speak with an advisor about your insurance needs, fill out the ‘Speak to an Advisor’ form on this page.

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