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What Income Protection Covers (and Doesn't)

Understanding what income protection pays for - and where limits apply

Introduction

Income protection insurance is designed to support you and your dependents if illness or injury prevents you from working. While it's one of the broadest personal insurances available, it doesn't cover every situation.

Understanding what it does (and doesn't) cover sets realistic expectations and reduces surprises at claim time.

💡 What Is Income Protection Insurance?

Income protection can replace up to around 70% of your regular income if illness or injury stops you from working - helping you maintain your lifestyle, meet financial commitments, and focus on recoveryy.

👉 Learn more: How income protection works | Monthly benefit calculations

✔️ What Income Protection Covers

Income protection pays a monthly benefit if you're unable to work due to illness or injury. This typically includes:

  • Physical illness or injury
  • Many mental health conditions (subject to policy terms)
  • Partial disability, where you can work but at reduced capacity and income

Your benefit is usually:

  • Is based on your pre-disability income
  • May be adjusted for income you continue to earn while on claim (offsets apply)
  • Paid until you return to work or reach the end of your benefit period
👉 Learn more: Claims process | Claims offsets

❌ What Income Protection Doesn't Cover

While income protection is broad, most policies do not cover:

  • Redundancy or job loss unrelated to illness or injury
  • Voluntary unemployment
  • Self-inflicted injuries
  • Disabilities caused by war
  • Injuries during criminal activity or incarceration
  • Undisclosed pre-existing medical conditions
  • Pregnancy, childbirth, or miscarriage (unless complications arise)
  • Elective cosmetic surgery in the first six months
  • Loss of income when not employed immediately before disability (important for cover held inside super)
Note: Some restrictions apply specifically to policies held inside superannuation. There are strategies that allow most premiums to be funded via super while limiting claim restrictions.

📋 General Eligibility Criteria

To qualify for income protection insurance, you generally must be:

  • Aged between 18 and 60 at application
  • Employed and working at least ~20 hours per week
  • Meet underwriting requirements (health, lifestyle, occupation)

Higher-risk occupations may face restrictions on waiting or benefit periods.

❓ Common coverage questions

🧠 Mental Health, Stress & Burnout

Yes, most retail income protection policies in Australia cover mental health conditions such as anxiety, depression, and stress-related illnesses, provided they are not excluded at application and meet the policy's definition of disability.

Stress and burnout may be covered if they result in a medically diagnosed condition that prevents you from working and meets the policy definition of disability.

Important to know

  • Pre-existing mental health conditions may be excluded
  • Group or default super fund cover may apply broad exclusions
  • Retail policies usually assess individually

⚠️ Pre-Existing Conditions

During application, insurers assess your health through underwriting. If a pre-existing condition is identified, the insurer may:

  • Apply an exclusion on that condition (it won't be covered)
  • Apply a premium loading

In some cases, exclusions or loadings may be reviewed and potentially removed after a period of stability (often 2–5 years with no symptoms or treatment).

⚠️ Non-disclosure or misrepresentation can result in claims being denied or policy cancellation.

🤰 Pregnancy & Parenthood

Income protection generally does not cover normal pregnancy, childbirth, or miscarriage.

However, complications arising from pregnancy that cause illness or injury may be claimable depending on the policy.

📉 Redundancy & Job Loss

No, income protection does not cover redundancy, business closure, or unemployment unless your inability to work is caused by illness or injury.

🧪 Medical Tests & Proof of Income

Depending on your age, occupation, and level of cover, insurers may request:

  • Medical tests (blood tests, GP reports, BMI)
  • Financial documents (payslips, tax returns, BAS)

All applicants must complete a personal statement. However, straightforward applications may not require any additional evidence.

💡 Tip: Clear, accurate disclosure usually results in faster underwriting and smoother claims.

📌 Key Takeaway

Income protection is designed to replace income lost due to illness or injury - not job loss or lifestyle choices. Understanding its coverage helps ensure your cover works as expected when you need it.

Frequently Asked Questions

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