Income Protection Insurance: Is It Worth the Cost in 2025?
Imagine waking up tomorrow and realising you can’t go to work — not just for a week or two, but for months or even years. Would you still be able to pay the bills, support your family, or keep your home?
That’s where Income Protection Insurance steps in. It’s designed to keep money coming in when injury or illness stops you from working. And in 2025, as the cost of living continues to rise across Australia, protecting your income has never been more important.
At Covered Life, we help Australians find affordable, tailored income protection policies that safeguard their lifestyle and financial future.
What Is Income Protection Insurance?
Income Protection Insurance (also known as salary protection insurance) pays you a monthly benefit if you’re unable to work due to illness, injury, or disability.
Most policies replace up to 70% of your pre-tax income until you’re well enough to return to work — or until the benefit period ends.
You can choose a waiting period (the time before payments start) and a benefit period (how long payments last), allowing you to customise the cover based on your financial situation.
Unlike TPD or life insurance (which pay lump sums), income protection gives you ongoing, regular payments to help maintain your financial stability during recovery.
How Does Income Protection Work in Australia?
Here’s a simple example:
Let’s say you earn $6,000 per month and take out a policy covering 70% of your income. If you suffer a back injury and can’t work for six months, you could receive $4,200 per month after your waiting period.
That benefit can help cover essentials like:
Rent or mortgage payments
Groceries and utility bills
School fees and family expenses
Medical or rehabilitation costs
It’s designed to ensure that your lifestyle doesn’t collapse just because your income does.
Who Needs Income Protection Insurance?
In short — anyone who relies on their income to live.
That includes employees, self-employed professionals, tradies, and business owners.
If you don’t have sick leave, or your savings wouldn’t last more than a few months, income protection can be a financial lifeline.
You should consider it if you:
Are self-employed or run a small business
Have a mortgage, rent, or other major financial commitments
Support a partner or dependents
Work in a physically demanding job
Want to protect your financial independence
Even if your employer offers some level of income protection, it’s worth checking the fine print — coverage through super or workplace plans can be limited or slow to pay out.
How Much Does Income Protection Insurance Cost in 2025?
The cost of income protection insurance depends on several factors, including:
Your age and occupation
Your health and smoking status
The waiting and benefit periods you select
Whether you choose stepped or level premiums
While premiums can vary, the peace of mind it provides is invaluable.
Plus, premiums are generally tax-deductible when the policy is held outside superannuation, making it one of the few insurances that can offer a financial return at tax time.
At Covered Life, we compare policies from leading Australian insurers to find the best balance of coverage, affordability, and flexibility for your situation.
Is Income Protection Insurance Worth It in 2025?
With rising living costs, increased mortgage rates, and financial uncertainty, Australians are more aware than ever of how vulnerable their income really is.
A few key facts highlight the risk:
According to Safe Work Australia, over 130,000 serious workplace injury claims are made every year.
The ABS reports that 1 in 5 Australians aged 18–64 live with a long-term health condition that can limit work capacity.
The average Australian household would run out of savings within 10 weeks without income.
Income protection insurance helps bridge that gap — giving you stability when you need it most.
Without it, even a short-term illness or injury can lead to credit card debt, mortgage arrears, or drained superannuation.
With it, you can focus on recovery without worrying about how you’ll pay the next bill.
What Income Protection Covers (and What It Doesn’t)
Most income protection policies cover a wide range of illnesses and injuries, from physical to psychological conditions. You’re generally covered for:
Musculoskeletal injuries (like back strain or joint damage)
Serious illnesses such as cancer, stroke, or heart attack
Mental health conditions including depression and anxiety
Accidents and injuries that prevent you from performing your job
However, most policies don’t cover:
Redundancy or job loss
Self-inflicted injuries
Pre-existing conditions (depending on your health disclosure)
That’s why working with an experienced broker like Covered Life matters — we’ll help you understand what’s included, what’s excluded, and how to structure your policy to fit your real-world risks.
Inside Super vs. Standalone Income Protection
You can hold income protection through your superannuation fund or as a standalone policy.
Each has advantages:
Inside Super: Convenient, premiums are paid from your super balance, reducing out-of-pocket costs.
Outside Super: More flexible, faster claims, and broader cover options (including mental health and partial disability benefits).
Many Australians choose a combination approach — keeping some cover inside super while maintaining a more comprehensive policy outside.
Our team can help you balance the two for cost-effective protection.
Why Choose Covered Life for Income Protection Insurance?
At Covered Life, we understand that insurance should make life simpler — not harder.
We compare trusted Australian insurers to find policies that fit your career, income, and goals, providing:
Personalised advice based on your situation
Clear, jargon-free explanations
Transparent quotes from multiple providers
Help with claims, adjustments, and renewals
We’re here to make sure your insurance works for you, not the other way around.
Protect Your Paycheck,
Protect Your Lifestyle
Your ability to earn an income is one of your most valuable assets — more valuable than your car, home, or even your savings. Income Protection Insurance ensures that if illness or injury keeps you from working, your lifestyle and goals stay on track.
Don’t wait until it’s too late.
Speak to a Covered Life insurance specialist today
and discover how easy it is to protect your financial future.
General advice disclaimer: The information in this article is general in nature and doesn’t take into account your personal financial situation, needs, or objectives. Always seek advice from a licensed professional before making decisions about your insurance cover.
