Do I Really Need Income Protection?
Wondering whether income protection is worth it?
Perth Financial Planner Tim Grapiglia breaks down what Income Protection Insurance is, why Centrelink probably won’t cut it, the tax perks, and the real world stats on illness, injury, and time off work - so you can decide with confidence.
1. What exactly is income protection?
Put simply, Income Protection Insurance is a monthly pay cheque that kicks in when sickness or injury stops you working. Think of it like a backup generator for your salary. Next, policies usually cover up to 70% of your regular income (sometimes more for super contributions). After that, you choose:
Waiting period (how long you self-fund before payments start).
Benefit period (how long payments last).
Easy, right?
2. “You won’t believe this, but…” Centrelink payments are tiny
If work stops, many Aussies picture government support swooping in. Reality check: the JobSeeker Payment for a single adult with no kids is $781.10 per fortnight - about $56 a day before tax Services Australia. Coffee and smashed avocado money? Sure. Mortgage, groceries, school fees? Not even close.
Can you imagine stretching that to cover rent, electricity, and Uber Eats when you’re laid up after knee surgery? Yeah, me neither.
3. Why it matters for families and solo flyers
For families
Kids still need cereal, sports gear, and the odd Lego set. Income Protection keeps the household humming so your partner doesn’t become a one person ATM.
For individuals
No dependants? Sweet. You still have bills, loan repayments, and Friday night takeaway delivery. Plus, relying on parents or mates at 35 feels… awkward.
4. The odds: who actually needs it?
3.5 % of working Australians report a work related injury or illness each year Safe Work Australia.
21.4 % of Australians live with a disability that lasts six months or more Australian Bureau of Statistics.
Leading insurer TAL paid $2.3 billion in claims in just six months of 2024 - 29 % for mental-health-related income-protection and TPD claims TAL.
Short version? People get sick, slip disks, or burn out way more often than we like to think.
5. Quick story time
I once had a young client - let’s call her Jess - who loved surfing and hated talking insurance. Six months after our chat she tore her ACL. No wave riding, no work (she’s a physio), no income. The policy we set up covered 70% of her salary for nine months, so rehab was about dumbbells and Netflix, not overdue credit card bills. Jess later said, “I thought Income Protection was for old CEOs, turns out it saved my bacon.”
6. Tax perks that the ATO is cool with
Here’s a little win: Income Protection premiums you pay personally are tax deductible Australian Taxation Office. Pocketing even a modest refund each year makes the cover cheaper than most gym memberships (and you actually use it when disaster strikes).
7. “It’s kind of like when…” - making sense of waiting periods
Think of the waiting period as an insurance excess in time rather than dollars:
Short wait (14–30 days): Pricier premiums, faster cash flow.
Long wait (90 days +): Lower premiums, but you need healthy savings or sick leave to bridge the gap.
Pick the gap your bank account can stomach.
8. Let’s be real… common myths (and a chuckle)
| Myth | Reality |
|---|---|
| “My Life Insurance covers that.” | Life Insurance pays out if you die – kind of hard to pay the mortgage from the afterlife. |
| “Workers’ comp will sort me.” | Only if you’re injured at work and meet strict criteria. Slip while chasing your toddler? No dice. |
| “I’m young and fit.” | So was Jess. ACLs, glandular fever, and mental health leave don’t check your birth year. |
Trying to fund recovery on JobSeeker is like juggling water, looks possible for a second, then… splash.
9. Simple 3 step game plan
Crunch your numbers. How long could you cover expenses if income stopped today?
Chat to a Financial Planner. We’ll tailor the waiting period, benefit period, and add ons.
Review annually. New job, mortgage, or baby? Update the cover.
After that, sleep better. Finally, get back to binge watching your favourite TV shows.
10. Thought provoking questions before we wrap
Could your family stay in the same house if you were off work for six months?
How many pay cycles are in your emergency fund?
Is saving a few dollars on premiums worth the stress of relying on Centrelink?
Ready to take the next step?
If peace of mind sounds good, let’s chat. Book a free 15-minute call and see whether income protection (or other life-insurance options) fits your world. What’s your backup plan if tomorrow doesn’t go to plan?
General advice only; consider your circumstances before acting.
Written by Tim at EvolvU.
Insurance made simple.
Protection made personal.
Looking into Income Protection and wondering about Life Insurance too?
Check out: Do I Really Need Income Protection?