Group Vs Personal Income Protection Insurance: What’s the difference?

At a glance:

• Group and personal income protection differ in ownership, cost, customisation, and policy continuity across careers.
• Group cover suits employees wanting simple, employer-arranged protection without personal underwriting requirements.
• Personal income protection offers flexible benefit options tailored to income needs, budget, and risk preferences.
• Group cover may end when employment changes, while personal policies remain active with ongoing premium payments.
• Choosing the right structure depends on job stability, financial goals, health factors, and long-term insurance needs.

 

 

Income protection plays an essential role in safeguarding earnings during periods of illness or injury. However, the two main types of income protection, group and individual policies, operate in different ways in Australia. Cover can be arranged either through an employer as group income protection or purchased individually as a personal policy.

Each structure has distinct rules around ownership, cost, underwriting, and continuity of cover. Understanding these differences is important for ensuring your protection remains aligned with your employment situation, financial goals, and long-term risk profile.

This article explains how group and personal income protection policies work, their key features, and the factors to consider when deciding which structure better supports your income security.

 

 

What Is Group Income Protection Insurance?

 

Group income protection is an insurance policy arranged by an employer to safeguard an employee’s income if they are unable to work due to illness or accidental injury. It replaces a portion of an employee’s salary during a period of temporary disability, up to the specified percentage and time limits.

Instead of each employee taking out an individual policy, the cover is issued under a single master policy for eligible team members. This type of cover is most commonly provided through employers, industry associations, or, in some cases, superannuation funds as part of an employee benefits program.

When a claim is approved, the insurer pays the benefit to the employer rather than directly to the employee. The payment is then processed through the payroll system, which means the employee receives the benefit in the same way as ordinary income. The employer usually funds the premiums, although some arrangements may deduct the premiums from salary. Policy settings, such as waiting and benefit periods, are chosen when the cover is first established.

Further details, such as the key features of group income protection insurance, its benefits, and limitations, will be outlined in the sections below.

 

Key Features of Group Income Protection Insurance

Group income protection policies include a range of features that determine how benefits are paid and how the policy operates during periods of illness or injury. Common built-in features include:

• Total Disability Benefit: Pays a regular benefit when the insured is unable to perform any duties due to illness or injury.
• Partial Disability Benefit: Pays a proportionate benefit when the insured returns to work in a reduced capacity with reduced income.
• Death Benefit: Pays a lump-sum amount to the nominated beneficiary if the insured dies while receiving income protection benefits.
• Retraining Expense Benefit: Covers approved vocational retraining costs when the insured cannot return to their previous role but may work in another capacity.
• Increasing Benefits (Escalation Benefit): Increases disability payments each year based on CPI or a fixed percentage to adjust for inflation.
• Recurrent Disability: Restarts benefit payments without a new waiting period if the same condition recurs within the defined timeframe.
• Standard Cover: Provides automatic acceptance for eligible employees under group terms without personal medical underwriting.
• 24-Hour Worldwide Cover: Maintains cover at all times, including overseas travel or residency, as long as policy conditions are met.
• Cover While on Leave Without Pay: Keeps employees covered during approved unpaid leave for the period allowed under the policy.

 

Benefits of Group Income Protection

Group income protection offers several key advantages for employees and employers, including:

• The policy provides comprehensive coverage, including disability benefits, death benefits, and retraining support under a single centrally arranged policy.
• Employees receive cover automatically through their employment without needing individual underwriting or policy management.
• Premium payments stop for the entire benefit period once a claim is approved.
• Some policies offer occupational rehabilitation, retraining, or workplace adjustments to assist recovery.
• Structured support helps minimise long-term vacancies, replacement costs, and workforce gaps.

 

Limitations of Group Income Protection

Group income protection also has structural limitations that can affect individual employees, including:

• Cover is issued on standard group terms, so employees cannot customise their own policy settings.
• Cover stops when an employee leaves, unless a continuation option is available.
• The employer pays the premiums, treating the benefits as taxable income for the employee.
• Group cover cannot normally be taken to a new employer or converted to a personal policy unless the insurer offers a rollover option.

 

 

What Is Personal Income Protection Insurance?

 

Personal income protection is an insurance policy purchased directly by an individual rather than through an employer. The policy provides financial support by replacing part of the policyholder’s income if they are unable to work due to illness or injury, which is a key reason why income protection insurance matters for long-term financial security.

Unlike group policies, the cover, waiting period, benefit period, and insured amount are selected by the individual when the policy is taken out, allowing greater tailoring to personal circumstances. Monthly benefits are generally calculated as a percentage of pre-disability income and continue for the length of the chosen benefit period.

Most income protection policies cover around 50–75% of pre-disability earnings. However, insurers such as Aspect Underwriting offer up to 85% cover, depending on eligibility and policy terms.

The specific features, benefits, and policy conditions of personal income protection vary by insurer and will be outlined in the following sections.

 

Key Features of Personal Income Protection Insurance

Personal income protection policies offer a range of features that can be tailored to individual circumstances. Key features typically include:

• Paid as a monthly income benefit: Provides regular monthly payments during a covered illness or injury instead of a lump sum.
• Covers illness or injury that prevents work: Benefits are paid when the insured is medically certified as unable to perform their occupation under the policy terms.
• Benefit percentage based on pre-disability earnings: Monthly payments are calculated as a percentage of pre-disability income up to the insurer’s maximum.
• Choice of benefit period: The insured selects the length of benefits, which affects premium cost and long-term protection.
• Choice of waiting period: The insured chooses how long they wait before payments begin, with longer waiting periods reducing premiums.
• Continuity of cover: Cover remains active even if employment changes as long as premiums continue to be paid.
• Premium variation by risk factors: Premiums depend on age, occupation, lifestyle factors, and medical history.

 

Benefits of Personal Income Protection

Personal income protection delivers several benefits for individuals, including:

• Policy pays a regular monthly benefit during illness or injury to help replace lost earnings for the chosen benefit period.
• The insured has full control over policy structure, coverage, and selection of their own cover level, benefit period, and conditions.
• Individuals can adjust waiting period, benefit duration, and cover amount to suit their financial obligations and risk preferences. This is one of the reasons why tailored income protection insurance is important.
• The cover remains in place through job changes, career breaks, redundancy, or self-employment, as long as premiums are paid.
• Premiums can be tax-deductible when the policy is held outside superannuation, depending on individual tax circumstances.

 

Limitations of Personal Income Protection

Personal income protection also has limitations that may affect suitability and cost, including:

• Costs are based on personal factors such as age, occupation, health habits, and medical history, and may increase over time.
• Applicants must provide health and income details, and insurers may apply loadings, exclusions, or decline cover.
• Policies often limit or exclude coverage for existing conditions, hazardous occupations, or high-risk activities.
• Claims start only after the insured has completed the selected waiting period.
• Insurer rules may cap benefit amounts and duration regardless of how long the disability lasts.

 

 

Group vs Personal Income Protection: Quick Comparison 

 

Group and personal income protection policies operate differently in areas such as ownership, customisation, cost structure, and continuity of cover. The table below outlines the key differences at a glance.

Factor	Group Income Protection	Personal Income Protection
Coverage	Same terms for all eligible members	Customised to individual needs
Continuity	Ends if you leave the employer (unless a continuation option exists)	Stays in force regardless of job changes
Premiums	Lower, often subsidised or salary-sacrificed	Higher, paid entirely by the individual
Underwriting	Minimal or none (automatic acceptance)	Full medical and occupational assessment
Ownership	Employer or trustee holds the policy	Individual owns and controls the policy
Tax Treatment	Benefits are usually taxable as income	Premiums may be tax-deductible; benefits are generally taxable when paid

 

Coverage & Benefit Structure

Group income protection provides a standardised benefit structure for all eligible employees under the same policy. The cover is set at the employer level and usually includes a fixed benefit percentage, a waiting period, and a benefit period.

Personal income protection, by contrast, allows the individual to choose the waiting period, benefit period, and cover amount. Optional features such as indexation, trauma cover, or TPD add-ons (if offered by the insurer) can also be selected at the time of application.

 

Cost Differences

Group premiums are based on pooled risk and are generally lower because the cost is shared across a workforce or member base. Employers may fully fund premiums or make salary sacrifice arrangements.

Personal income protection premiums are individually risk-rated and can be higher, reflecting age, occupation, smoking status, and medical history. However, the individual can adjust waiting periods, benefit periods, and policy options to manage cost.

 

Portability & Continuity

Group cover is tied to employment and normally ends when the employee leaves the organisation, unless the policy offers a continuation or conversion option to transfer into a personal policy.

Personal income protection is fully portable and remains in force as long as premiums are paid. This portability enables continuity of cover across job changes, redundancy, career breaks, or self-employment.

 

Customisation & Flexibility

Group cover provides fixed terms that apply to all members. Waiting periods, benefit periods, and cover levels are set at policy purchase and cannot be modified individually.

Personal income protection allows full customisation of key features, including 30, 60, or 90-day waiting periods, benefit periods (e.g. 2 years, 5 years, or to age 65), and optional policy upgrades. The insured retains full control over any changes made.

 

Underwriting Requirements

Group policies typically use simplified or automatic underwriting, meaning most eligible employees receive cover without a medical assessment, unless they apply for additional voluntary cover.

Personal policies require full medical and financial underwriting, and the insurer may request health records, income verification, or occupational details before accepting the application.

 

Taxation

For employer-funded group policies, the benefit is usually treated as taxable income when paid to the employee through payroll.

For personally-owned policies held outside superannuation, premiums may be tax-deductible if the benefit is designed to replace income. However, the benefit is generally assessable for tax purposes when paid. Tax treatment varies based on ownership structure, funding method, and individual circumstances.

 

 

Key Factors to Consider When Choosing Income Protection Insurance

 

Selecting between group and personal income protection requires understanding how each type of cover aligns with employment circumstances, risk profile, and insurance needs.

The factors below help clarify the differences that influence suitability.

 

Employment Stability

Group income protection tends to suit people who expect to remain with one employer for extended periods.

For those whose careers involve movement, such as contractors, freelancers, or individuals changing industries, a personally owned policy is ideal. Moreover, a personally owned policy is the default choice for self-employed individuals or those taking a career break.

 

Need for Customisation

Group cover generally offers a set level of protection with fixed terms, making it suitable for individuals who prefer a straightforward policy without needing to choose specific benefit periods or add-ons.

Personal policies are better suited to people wanting control over key features, allowing them to tailor waiting periods, benefit durations, and optional extras to fit their financial commitments.

 

Budget and Premium Costs

Group income protection is often more affordable at the outset, as premiums are based on pooled risk or subsidised by the employer.

A personal policy may cost more, but it provides the flexibility to structure cover according to your needs and adjust premium levels through benefit choices and waiting periods.

 

Long-Term Protection

Group cover may not provide long-term continuity if employment ends due to redundancy, resignation, or career change. Access to new coverage later may be restricted by age, health, or underwriting outcomes.

Individuals seeking uninterrupted protection during job changes or self-employment should consider personal income protection.

 

Health and Occupation

Because many group policies offer automatic acceptance, they can be advantageous for workers in higher-risk roles or individuals with health conditions that may otherwise require underwriting.

Personal policies are underwritten individually and are often chosen by people who want terms that reflect their exact occupation, duties, and medical history.

 

Both group and personal income protection policies are designed to provide income support during periods of illness or injury, but they operate differently in terms of ownership, cost, flexibility, and long-term continuity. The most suitable option depends on factors such as employment stability, the need for policy customisation, premium budget, and whether cover is required to continue beyond a single job or employer.

Understanding how each structure works makes it easier to align the policy with long-term financial and career plans rather than focusing on price or features in isolation.

If you are reviewing income protection arrangements for a workforce or for your own policy, Aspect Underwriting can assist with structuring options across both group and individually held cover. Contact Aspect today to explore suitable structuring options and ensure your income protection aligns with your long-term needs.

 

 

FAQs

 

Can I have both group and personal income protection at the same time?

Yes. You can hold both group income protection insurance through an employer and a personal income protection policy you own yourself. The combined benefit can’t exceed the insurer’s income replacement limit (usually 70–75% of pre-disability income), but both policies can legally run at the same time.

 

What happens to my group policy if my employer changes insurers?

Your group income protection insurance doesn’t automatically transfer. The new insurer may apply different terms unless a takeover agreement preserves existing cover. Because the employer owns the policy, employees can’t stop or control the change.

 

Is income protection through superannuation the same as group cover?

Not exactly. The fund trustee holds income protection through super, and premiums are deducted from your super balance. In contrast, employer-based group income protection insurance is paid and managed through payroll. Super policies may also have stricter disability definitions and shorter benefit periods.

 

Can I convert a group income protection policy into a personal one?

Some policies allow a continuation option that lets you convert group income protection into an individual income protection policy when leaving employment, without re-assessment. Not all insurers offer this, and premiums usually increase because they switch to individual risk pricing.

 

Are income protection premiums tax-deductible in Australia?

Premiums for personal income protection insurance held outside super are generally tax-deductible. Employer-funded group premiums are deductible for the employer, but payments received are usually taxed as income. Tax treatment depends on policy ownership and funding method.

 

Does income protection cover redundancy or unemployment?

No. Income protection insurance in Australia only covers loss of income caused by illness or injury, not redundancy, dismissal, or business closure. Redundancy is not an insurable event under income protection policies.