Income Protection Explained

Times have changed. Recent events have shown us that anything can happen. The trick is to plan for the unexpected. Find out how income protection insurance can help when life changes.

One minute, we’re all living, working and hanging out as usual. The next, we’re in lockdown — worried not only about our health, but our jobs, too.

A crisis like the COVID-19 pandemic makes us all stop and think about the future - and how vulnerable we sometimes are. But while you can’t control unpredictable events, you can better prepare for them. One way to do that is with income protection insurance.

What is income protection insurance?

Income protection insurance, also known as IP, is pretty straightforward. If you can’t work because of an injury or illness, income protection insurance can provide replacement income for a set period of time.

If you’re interested in income protection, it’s important to understand some of the terms you might hear, such as waiting periods, benefit periods or qualifying periods before payments. So let’s explain.

Income protection insurance: waiting periods versus benefit periods

Income protection insurance involves both a waiting period and a benefit period. A ‘waiting period’ is the time you must wait between getting sick or injured and making a claim. This can usually be a choice of anything from 14, 28, 60 or 90 days.

A ‘benefit period’ is the length of time for which you can receive income protection insurance payments. Just as with waiting periods, you can choose a benefit period to suit you, generally anything from 6, 12 or 24 months, or 5 years.

The image below shows the difference between the two for a Virgin Income Protection policy:


Waiting periods for income protection explained

When is a good time to invest in income protection insurance?

When you’re well and working, it can be tempting to think an illness or injury (or even redundancy) won’t happen to you. But the unexpected does happen – often when we least expect it.

If you wait until something goes wrong or you get diagnosed with a serious illness, you might find you can’t get cover when you need it. Income protection, particularly involuntary unemployment cover, usually comes with a qualifying period. This means that after signing up, you might have to wait a while before you can claim.

So a good time to consider taking out insurance is usually when things are going well in your life (before you become sick or involuntarily unemployed).

What income protection costs

There are different levels of income protection insurance to suit a range of budgets, and you could get cover for as little as $31 per month*. That’s less than a cup of coffee a day. Also, depending on your situation, while income protection benefits paid to you are generally taxable, the premiums you pay each year may be tax-deductible – so don’t forget to ask your accountant about it.  

Getting income protection insurance is easy. Simply apply over the phone, and by answering a few health and lifestyle questions, you could be covered in no time.

* Premium of $31 per month could provide Sickness & Injury Cover of $2,200 a month for up to 2 years for a 32 year old male non-smoker, employed in a sedentary white collar occupation, after a 28-day waiting period.  Current as at 25 June 2020.

Ways you can lower income protection premiums

Similar to choosing a higher excess on your car or home insurance policy, you can usually lower your income protection premium by choosing a longer waiting period for your income protection policy. This is because you are carrying part of the financial risk of an illness or injury by using savings or sick leave entitlements to get you through before needing to claim on income protection insurance. 

The opposite is true for a benefit period. Typically, the longer the benefit period you choose, the higher your premium. This is because you are asking to be paid for a longer period of time if your illness or injury means you are unable to return to work.

In addition to level of income you choose to receive monthly, you can play around with different combinations of waiting periods and benefit periods to find a level of cover and premiums that suit your needs.

Get a quote here.

What income protection insurance covers

Income protection insurance provides replacement income when you can’t work due to an illness or injury. The amount you can be covered for varies, but with a Virgin Income Protection policy, you can receive as much as 85% of your regular, pre-tax income – up to $10,000 per month – if you get sick or injured and can’t work for a prolonged period. This is particularly useful if you don’t have access to sick leave benefits or have limited savings.

Consider it a financial safety net so you can focus on getting better rather than worrying about how you’ll pay the bills.

In a nutshell, if your claim is accepted, income protection insurance covers you if you can’t work because of an illness or injury, while the addition of the optional involuntary unemployment cover can assist you by helping to limit the financial impact of an unexpected involuntary redundancy.  

Of course, there are some terms and conditions (waiting periods, qualifying periods and exclusions) to consider, so it is really important you read and understand the product disclosure document before you make any decision about insurance.

If there’s anything we’ve learned from COVID-19, it’s that we can’t predict everything in life. More than ever, we need to prepare for the unexpected. And while it’s never the most exciting read, it’s always important to understand the finer details of income protection policies.

Learn more about Virgin Money’s Income Protection insurance and how you could enjoy the peace of mind that comes with knowing you’ve planned for the unexpected.

  • Important information

    Virgin Income Protection  is available to Australian Residents between 18-60 years of age. Applications subject to acceptance. Cover limits, exclusions and conditions apply. Premiums vary depending on personal circumstances and generally increase with age and cover. Please read the Product Disclosure Statement for further information.

    This information is of a general nature only which means it does not take into account your personal financial situation, needs or objectives. For this reason, you should consider whether it is appropriate for you. Before making the decision, please read the Product Disclosure Statement and Financial Services Guide, View Privacy & Security information issued to you when you purchased this product.

    Virgin Income Protection is promoted by Virgin Money (Australia) Pty Limited ABN 75 103 478 897, authorised representative No 280884 of Virgin Money Financial Services Pty Ltd ABN 51 113 285 395 AFSL 286869, and distributed by TAL Direct Pty Limited ABN 39 084 666 017 AFSL 243260. Policies and claims administered by TAL Direct under agreement with the insurers, TAL Life Limited ABN 70 050 109 450 AFSL 237848 and for Involuntary Unemployment Cover, St Andrew's Insurance (Australia) Pty Ltd ABN 89 075 044 656 AFSL 239649.

    For information about Virgin Money, TAL & St Andrew's and the Income Protection and Involuntary Unemployment insurance products referred in this article, please see the Product Disclosure Statement and Financial Services Guide.