Personal Insurances

What Factors Affect the Cost of Income Protection Insurance?

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.

by Lauren Spice

The Top 5 Common Misconceptions About Income Protection Insurance

Income protection insurance, you’ve probably heard of it, maybe even considered it, but chances are, it’s still sitting in the “I’ll look into that later” pile. And honestly? That’s understandable. It’s one of those things people often don’t prioritise until life throws a curveball.

But the thing is, a lot of the hesitation around income protection stems from common myths, the kind that get passed around in casual conversations or buried in Reddit threads.

Hence, let’s unpack five of the biggest misconceptions holding people back from getting the cover they might actually need.

Misconception #1: It Only Covers Serious Accidents

One of the most persistent myths is that income protection is just for freak accidents, i.e. car crashes, falling off a roof, major trauma. And while it does cover serious accidents, it's important to note that– that’s just a slice of the picture.

What many don’t realise is that most income protection claims are actually due to illness such as cancer, chronic fatigue, back pain, long-term Covid complications, and even stress and burnout. If you’re too unwell to work (mentally or physically) and you meet the policy’s conditions, income protection steps in.

Misconception #2: It’s Too Expensive for What You Get

Lots of people assume income protection is only for high earners. But here's the thing: the pricing is actually quite flexible, and policies can be tailored to your budget.

The key factors that affect your premium? Age, occupation, smoking status, waiting period, and benefit duration. Want to lower your premium? Opt for a longer waiting period or a shorter benefit period.

And when you stack it up against losing your income for months (or longer), the value becomes pretty obvious. Even a modest payout, say 70% of your income, can help cover rent, groceries, school fees, or mortgage repayments when you’re off work.

Also worth noting? Income protection premiums are often tax-deductible, depending on how the policy is structured. That alone can make the cost much more manageable.

Misconception #3: Workers’ Compensation or Sick Leave is Enough

We get it, it’s easy to assume that your employer or the government has you covered. And to some extent, they do. But it’s rarely enough to cover long-term leave.

Workers’ compensation only kicks in if your injury or illness is directly related to your job, and even then, it can be limited. Sick leave, meanwhile, is often capped at a few weeks. It’s great for short-term recovery, but what if you're unable to work for longer?

Income protection fills that gap. It’s not about replacing what you already have, it’s about complementing it.

Misconception #4: It Won’t Cover Mental Health Conditions

Mental health issues are one of the leading causes of workplace absence in Australia, and many insurers have responded by expanding their cover accordingly.

Today, most modern income protection policies do include mental health, provided it’s diagnosed and documented by a professional. That said, not all policies are created equal, and some may include mental health exclusions or stricter waiting periods.

What’s important here is clarity. If mental health cover matters to you (and honestly, it should), check the fine print or speak to an insurance broker. Better yet, disclose any relevant history upfront, that way, you know exactly what you’re covered for.

Misconception #5: “I Don’t Need It, I’m Young & Healthy”

When you’re young, you’re statistically less likely to claim, which means your premiums are lower and your cover options are wider. You’re also more likely to be approved without exclusions or loadings (higher costs) for pre-existing conditions.

Income protection is like an umbrella. The time to get one isn’t when it’s already raining. It’s while the sun’s still out.

Get Insured Today– Before Life Happens

No one likes to think about being unable to work. But for many Australians, it often happens unexpectedly. And when it does, it’s good to have income protection insurance. It’s essentially the difference between financial freefall and stability.

So, if you’ve been putting it off, maybe because of one of the myths above, now is a good time to rethink things. Talk to an expert, ask the right questions, and most importantly, read the fine print.

If you need assistance obtaining income protection insurance or have questions about the details, contact us to speak with one of our experienced brokers.

by Lauren Spice

How Much Income Protection Insurance Do You Really Need?

Here’s the truth: there’s no neat, one-size-fits-all number when it comes to income protection insurance–and any broker that tells you otherwise is probably more interested in a quick policy sale than actually protecting your livelihood.

So, let’s break it down properly.

First, What is Income Protection Actually For?

Income protection insurance steps in when you can’t. It’s specifically designed to replace a portion of your income if you’re unable to work due to illness or injury, up to 70% of your regular pay. It’s not designed to make you rich, but what it does do is give you breathing room–enough to keep the lights on, the rent/mortgage paid, and food on the table while you prioritise getting back on your feet.

But how much do you really need? That’s where it gets personal.

Start With Your Monthly Essentials

This is exactly where most people underestimate things. Income protection isn’t just about covering your lost salary, it’s about helping you manage your basic needs, such as:

• Rent or mortgage payments
• Groceries
• Utility bills
• Petrol or public transport
• Phone and internet bills
• Kid’s school fees (if that applies to you)
• Debt repayments (credit cards, loans, etc).

Now, add a bit of buffer room. You might be spending more at home if you’re recovering, i.e. extra heating, takeaway meals, medical appointments. Likewise, don’t forget to take into account private health insurance premiums if you’re paying them out of pocket.

Tally that all up. The sum is the bare minimum you need your income protection policy to cover each month.

Now Consider Your Lifestyle

Not everything you budget for is essential, but it still matters. Most people don’t want to downgrade their lifestyle while recovering, and frankly that’s fair enough. You’re already off work, dealing with doctors, and stuck at home. You don’t want to also cancel your monthly subscriptions, give up your streaming services, or feel like you’re losing more than you already have.

We’re not suggesting that you be able to cover every last luxury,but aim for enough coverage that you can maintain a sense of normalcy in your life. If the ultimate goal is to recover and return to work, keeping some semblance of your usual life makes that transition much easier, both mentally and emotionally.

What’s Your Current Income?

Income protection is usually capped at a percentage of your pre-tax income, oftentimes at 70% or less. Some policies might offer more, particularly if they include super contributions.

For instance, if you’re earning $6000 per month before tax, your monthly benefit might max out at $4200. That’s what you’ve got to work with. Now compare that against your monthly expenses and lifestyle costs? Is it enough?

If not, you might want to look at additional policies, trauma insurance, or even consider topping up with savings or a rainy-day fund.

Consider the Waiting Period

The waiting period is how long you’ll need to wait before your policy starts paying out. Common waiting periods tend to be 30, 60, or 90 days long.

The longer the wait, the cheaper the premium. But the real question is: how long can you realistically go for without an income?

If you’ve got a decent amount of sick or annual leave built up, you might be able to get away with a longer waiting period, but if you’re self-employed, casual, or don’t have that safety net, you’ll want a shorter waiting period, even if it might cost more.

How Long Should It Pay Out For?

This represents your benefit period. Some policies pay out for a maximum of two years, while others may cover you till you’re 65. The longer the benefit period, the higher the premium, but again, it depends on your job, health, and financial plan.

For instance, if you’re in a trade or physically demanding role, and an injury could take you out long-term, a two-year policy probably won’t cut it. Likewise, if you’re still early in your career and building up assets, you might want the reassurance of longer cover.

Don’t Just Pick a Policy and Forget It

Your income protection needs aren’t static. Got a pay rise? Had a kid? Maybe you bought a house? Your policy should change with your life. A lot of people set up their income protections when they first get a job, and then never look at it again.

You should at least be reviewing your cover every couple of years, or any time there’s a major life change. Otherwise, you might find yourself uninsured just when you need it most.

So, How Much Do You Really Need?

At the very least, enough to cover your core monthly expenses–rent, mortgage, food, utilities, and/or debt repayments. That’s a non-negotiable. From there on, it depends on how much of your lifestyle you want to protect and how long you could survive for without a stable/regular income.

The good news? You don’t have to figure this out all alone.

At Morgan Insurance Brokers, we’ve helped tradies, business owners, freelancers, and families all across Australia get the right income protection insurance policy for their needs. We’ll work closely with you to tailor a policy that’s grounded in your real-life numbers, not just what some insurers form says you might need.

Whether you’re just starting out or reassessing after years on the same policy, we’ll help match you with the right cover, one that helps you maintain as much normalcy as possible when life throws you a curveball.

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

by Lauren Spice

Can Income Protection Insurance Be Used for Mental Health Conditions?

If you’ve ever needed time off work for anxiety, depression, burnout or another psychological condition, you’ll know the impact it can have, not just on your wellbeing, but on your income. It’s a growing concern too. More Australians are taking leave due to mental health issues than ever before, and for some, that’s where income protection insurance steps in.

But can it actually cover time off due to mental illness? The short answer is yes, though it depends on your policy, the severity of your condition, and how your insurer assesses your claim. It’s not always straightforward, but it’s worth understanding your options.

For more information on income protection insurance, read this. 

Types of Mental Health Conditions Commonly Covered

According to a National Study of Mental Health and Wellbeing, approximately 42.9% of Australians aged 16-85 have experienced a mental disorder at some point in their lives. In fact, mental health conditions have emerged as the leading cause of income protection and total and permanent disability (TPD) claims for several years. 

This alone underscores the significant impact of mental health conditions on the Australian workforce and the importance of income protection insurance in providing financial support during periods when individuals are unable to work due to mental health issues.

While income protection insurance is typically associated with physical injuries or illnesses, most comprehensive policies also cover a range of mental health conditions. This typically includes:

• Depression, one of the most common claims, especially when severe and diagnosed by a medical professional.
• Anxiety disorders, generalised anxiety, panic disorders, and social anxiety may be covered if symptoms significantly impair your ability to work.
• Post-Traumatic Stress Disorder (PTSD), often linked to trauma, including workplace incidents, and must be diagnosed by a psychiatrist or psychologist.
• Bipolar disorder, this tends to involve stricter conditions and more frequent reviews, but is often eligible under long-term claims.
• Adjustment disorder and burnout, while harder to prove, these are increasingly recognised as valid causes for extended sick leave.

Not every policy covers all of the above, and some may include mental health exclusions unless disclosed during the application. The key is transparency: if you’re upfront with your medical history when applying, you’re more likely to be covered down the line. 

Policy Terms to Be Aware of 

This is where things get a bit nuanced. Just because a policy can cover mental health doesn’t mean it will, or that it will do so without a few caveats. Here are a few things to watch for:

• Exclusions, some insurers still include general exclusions for mental health conditions. Others might exclude pre-existing conditions, especially if you’ve had treatment within a certain timeframe before taking out the policy.
• Waiting periods, most policies have a waiting period. This means you won’t receive payments immediately after taking leave, you’ll need to be off work for the entire waiting period first.
• Benefit periods, depending on your policy, you might be entitled to income support for two years, five years, or until a certain age. Long-term claims for mental health can be reviewed more rigorously than physical ones.
• Partial disability claims, if you can return to work in a reduced capacity, say, part-time or in a different role, you may be eligible for partial benefits, depending on your policy’s structure.
• Medical evidence, mental health claims almost always require supporting evidence from specialists. Regular GP notes may not be enough.

3 Steps to Claiming Income Protection Insurance for Mental Health Conditions 

So how does one actually go about making a claim? 

1. 1. First, before approaching your insurer, consider speaking to your GP or a mental health professional first. It’s mandatory to have an official diagnosis and clear recommendation that you’re unfit to safely perform your job duties. This documentation then becomes the foundation of your claim. 

1. 1. Next, notify your insurance provider that you now intend to file a claim. They’ll provide you with a form that will outline what’s needed, typically including: 
      • The initial GP report
      • A certified copy of your identification 
      • The policy schedule 
      • All standard claim forms and other relevant documentation or reports.

1. Last but not least is the assessment and decision process. This can take some time as the insurance company will meticulously assess your claim based on the severity of your condition. IF approved, you’ll then begin receiving payments (after the waiting period ends) to help cover your income while you recover. 

Pro Tip: Keep detailed records, everything from appointment notes to communications with your insurer. It’ll make a huge difference if a dispute arises. 

Choosing the Right Policy

It’s definitely tempting to omit certain parts of your mental health history to secure lower premiums. But remember, this can backfire if and when you need to make a claim. A good insurance broker can help you find cover that doesn't penalise you for being upfront. 

Get in touch today to find out how we can support you.

by Lauren Spice