Let’s not beat around the bush–income protection insurance is not cheap. Nonetheless, there’s a good reason for that. You’re insuring your most valuable asset: your ability to earn an income.

That being said, not everyone pays the same rate. Two individuals earning the same salary might have very different premiums, and it often leaves most people wondering, “why is mine so high?” or “what’s actually driving the cost of my policy?”

So, here’s a proper breakdown of the key factors that influence the cost of your income protection insurance–the factors that insurers actually care about, and what you can (and can’t) control.

Your Job

This is probably the most important factor.

Insurers look closely at what you do for a living, because that tends to directly impact how likely you are to get injured or sick and how long you might be off the tools.

So, if you’re a tradie on-site every day, climbing ladders or handling heavy equipment, you’re bound to be rated as higher risk compared to, say, a marketing consultant sitting at a desk all day. It doesn’t matter how fit or experienced you are, it’s all about statistical risk.

Generally speaking, jobs fall into risk categories, and that changes your premium. The more physical or high-risk your work, the more you’ll pay in monthly premiums. Regardless, don’t let that put you off, income protection is even more essential if you do work in a risky role.

Your Age

No surprise here. The older you get, the higher your premiums.

Why? Because your risk of illness and injury increases with age. Insurers know that recovery can take longer, and the chance of something serious popping up (i.e. back issues or chronic illness) goes up as you get older.

That said, most of the time, if you lock in a policy while you’re younger and healthier, you can often hold onto the lower premium for the life of the policy. So, the earlier you sort it out, the better.

Your Health and Medical History

This one’s significant, and it can get complicated.

When you apply for cover, insurers will almost always ask about your health history. That includes any pre-existing medical conditions, past surgeries, mental health history, and lifestyle habits. If there’s anything in your medical background that raises a red flag, insurers might:

• Increase your premium value.
• Add exclusions to the policy.
• Or in some cases, decline cover altogether.

While it’s not always a dealbreaker, it will affect the cost of your policy. This is why being upfront during the application process is key. A good broker will help you navigate this without tanking your chances of getting covered.

Smoking and Lifestyle Habits

If you’re a smoker, you can expect to pay more–a whole lot more.

Smokers pay significantly higher premiums than non-smokers. Why? Well, because statistically, smoking increases the risk of just about everything, from heart disease to cancer and respiratory issues.

Other lifestyle factors such as heavy alcohol consumption or high-risk hobbies (i.e. skydiving, motorsports, mountaineering) can also affect your premiums or attract exclusions. Once again, it all comes down to risk. If you’re engaging in lifestyle habits or hobbies that make you more likely to get injured or ill, you’ll pay for it in the policy.

How Much You Want to Be Paid (Benefit Amount)

This one’s straightforward. The more of your lost income you want replaced, the higher your premium.

Most policies will cover up to 70% of your gross income plus super guarantee contributions, but you don’t have to insure the full amount. Some people choose to pay a lower benefit if they’ve got other savings, a partner’s income, or just want to keep premiums down. However, it’s important to remember not to short-change yourself when you’re off work and counting every dollar.

Waiting Period

This is the amount of time you’ll need to wait after making a claim before payments start coming through. Common waiting periods are 30, 60, or 90 days. The shorter the wait, the higher the cost. This is because you’re asking the insurer to step in sooner to process your claim. If you can afford to wait a little longer, maybe you’ve got enough sick or annual leave and some savings, you can bring the cost of the premium down.

Benefit Period

This refers to how long the policy will pay you if you’re off work long-term.

Options typically range from two years and usually up to age 65. The longer the benefit period, the more you’ll pay–but that also comes with more protection. If your injury or illness drags on, that longer cover can be the difference between financial stress and peace of mind.

Again, think about your job. If you’re in a role where recovery might take a while, or you’re your household’s main source of income, longer cover is worth considering.

Policy Type and Add-Ons

All income protection policies are indemnity (based on your income at the time of claim). Agreed value policies used to be more expensive and have been phased out unless you already have an existing older policy. Add-ons like indexation (where your benefit increases with inflation), will also raise the premium.

Need Help With Insurance? We’ve Got You

At the end of the day, income protection isn’t about finding the cheapest policy–it’s about finding the right policy.

There are plenty of moving parts that affect the cost, but with the right advice and a broker who listens to your needs, you can structure a policy that’s both affordable and tailored to your needs.

At Morgan Insurance Brokers, that’s exactly what we do. Whether you’re just starting out, self-employed, or looking to review an old policy, we’ll help you get the protection you need–without paying more than you need to.

Contact us today for more information on how we can help you.