How Much Income Protection Insurance Do I Need?

The right level of cover depends on your income, expenses, and financial commitments. While the exact figure will differ for everyone, here are key points to consider:

1. Your Regular Expenses

Start by adding up your monthly costs — such as mortgage, rent, bills, food, and transport. Your income protection should ideally cover these essentials so you can maintain your standard of living.

2. Your Financial Dependants

If you have a family or dependants who rely on your income, higher cover may be appropriate. It ensures you can continue to support them even if you can’t work.

3. Your Savings and Emergency Funds

If you have enough savings to cover several months of expenses, you may choose a longer waiting period to reduce your premium. If you have minimal savings, a shorter waiting period could be worth considering so benefits start sooner.

4. Your Debts and Liabilities

Consider ongoing financial obligations like home loans, car finance, or personal loans. Your income protection benefit should be enough to keep these payments up to date during recovery.

5. Your Superannuation and Other Insurance

If you already have income protection through your super fund, review how much it covers — and whether that’s sufficient. Super-based policies often have shorter benefit periods and fewer built-in features, so understanding any gaps in cover is important.

Key Policy Choices That Affect Your Cover

Benefit Amount

Most policies allow up to 70% of your income, though some may offer up to 75%.

Waiting Period

The time before benefits start (e.g. 30, 60, or 90 days).A longer waiting period lowers premiums but delays payments.

Benefit Period

The maximum time payments continue (e.g. 2 years, 5 years, or to age 65).Longer benefit periods cost more but provide extended protection.

Example

Let’s say Alex earns $90,000 a year ($7,500 a month).He chooses a policy covering 70% of his income = $5,250 per month.

• Waiting period: 60 days

• Benefit period: 5 years

  
  

If Alex broke his leg and couldn’t work for six months, his income protection payments could help cover his mortgage and household expenses during recovery.

Why Too Little or Too Much Cover Can Be a Problem

• Underinsured: You might struggle to cover bills or debts if benefits fall short.

• Overinsured: You could pay unnecessary premiums for cover that exceeds your actual needs or insurer limits.

That’s why reviewing your income, expenses, and existing cover regularly is essential.

Making an Informed Decision

At Covermate Life, we can explain how income protection works, outline policy features, and help you understand the options available from different insurers.

We provide general information only — not personal financial advice — so you can make confident, informed decisions about protecting your income.If you’re unsure what level of cover is suitable for your personal circumstances, consider seeking advice from a licensed financial adviser.

Key Takeaway

The amount of income protection you need should reflect your financial responsibilities, lifestyle, and safety nets. For most Australians, aiming to protect around 70% of their income offers a practical balance between affordability and peace of mind.

Income protection can help ensure that if life takes an unexpected turn, your finances — and your future plans — stay on track.

Important Information

This article is for general information only and does not take into account your personal objectives, financial situation, or needs. Before making any decision, consider the appropriateness of this information and read the relevant Product Disclosure Statement (PDS).For personalised advice, seek assistance from a licensed financial adviser.

Talk to Covermate Life

Learn more about how income protection works and explore cover options today. Get a quote today.