How Much Does Income Protection Cost?

Income protection insurance is one of the easiest ways to protect yourself in the event of being unable to earn a living.

For many people, their ability to earn an income will be their most valuable financial asset. Your house or your superannuation could be worth hundreds of thousands, if not millions, but generally your lifetime earning potential will be far greater.

It may make sense to protect this asset with insurance, but just how much does income protection cost, and how are the premiums calculated?

Income Protection Costs

Income protection insurance is an extremely flexible product, and for this reason the premiums can vary hugely depending on your own circumstances as well as the options you choose for your policy.

There are two sides to the calculation of income protect premiums. Firstly the insurance company will consider your personal risk. This relates to the type of work you do, as well as your age and your health position.

Next the insurer will consider the financial risk. This takes into account the amount you are insuring yourself for, along with the options you choose and how those options will affect the likelihood of a claim being made.

Premium Factors

When obtaining quotes for income protection insurance you will be asked a number of questions. In most cases these questions will include you age, gender, occupation and smoking status. These factors will enable the insurance company to set a base rate for your cover.

Your age and gender affect your premium due to the differing health profiles of people of different ages and genders. As you get older your risk of illness can increase, and your ability to recover from physical injuries can decrease. For this reason premiums will generally increase with your age.

Your occupation will also have a major impact on your income protection premium. Manual workers and other occupations considered to be higher risk will generally attract higher premiums than those working in office environments.


There are a huge range of options when it comes to an income protection policy, and each of these options will affect the cost of your insurance.

The amount of cover you require will have a major impact on your premium. This is known as the monthly benefit amount, and will generally be equal to 75% of your income. You can choose to insure for less if you wish, and this can reduce your insurance premium.

Your waiting period and benefit period will also affect your insurance cost. Generally a longer waiting period will equate to a lower premium, as will a shorter benefit period.

There are a number of other optional extras which will also affect your premium, so you will need to weigh up whether or not these extras are important to you and are worth the extra cost.


This article is about income protection insurance and is general information only. It should not be treated as factual, as personal advice or be the basis of purchasing any insurance policy. Before deciding on an insurance policy read the PDS carefully and talk to a licensed insurance agent if you need further assistance. MoneyBuddy does not recommend insurance products or provide personal advice in regards to insurance products.

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