At a glance:

  • Income protection policies replace lost income due to injury or illness, covering up to 85% of your earnings.
  • While some employers offer income protection, many do not, making it primarily the individual’s decision.
  • Group income protection through employers can be cost-effective and cover pre-existing conditions.
  • Individuals should prioritise personal income protection for financial security, regardless of employer coverage.



An income protection policy is designed to pay you a monthly benefit to replace your income if you become unable to work due to an injury or illness. You can be paid up to 85% of your income from an income protection policy.


This insurance comes in handy if you or your family rely completely on your income to support your lifestyle; it will protect your most important asset in the best possible way.


If you have just started working, you might be wondering if your employer provides income protection or not. The answer is some do, but many employers do not provide you with income protection insurance. Income protection is most likely your decision, not the employer’s.


Income protection is beneficial for all age groups and people working in every sector, even if you are self-employed.


Income Protection – Is It My Decision or My Employer's



Whose decision is it to provide income protection insurance?


When it comes to income protection insurance, many individuals wonder whether it is their own responsibility or their employer’s to secure coverage. This question often arises as employees seek financial security in case they are unable to work due to illness, injury, or other unforeseen circumstances. We will explore the dynamics of income protection insurance and shed light on the roles of both individuals and employers in obtaining this essential coverage.



The Role of the Employer in Income Protection


Employers have a crucial role to play when it comes to income protection. They understand the value of safeguarding their employees’ financial well-being and offering income protection insurance can be a testament to their commitment. Let’s delve deeper into the employer’s role in income protection:



Circumstances under which employers provide income protection


Employers often provide income protection insurance as part of a comprehensive employee benefits package. This coverage serves as a safety net for employees, ensuring their financial stability in case of unexpected disruptions to their earning capacity. By offering income protection, employers demonstrate their support for employees’ long-term financial security.


Group income protection insurance and its benefits


Some employers may provide income protection as a part of an attractive welfare package – because the benefits of income protection insurance are undeniable. Employees are the greatest asset within a company, and many give years of faithful service to the organisation. This is why some employers will offer employee benefits such as income protection.


Group income protection insurance is a common approach adopted by employers to provide coverage to their workforce. This type of insurance covers a group of employees, typically within a specific organisation, under a single policy. It offers several advantages, such as:


  1. Cost-effectiveness: Group income protection insurance can often be more cost-effective compared to individual policies, as the risk is spread across a larger pool of insured individuals.
  2. Simplified administration: With a single policy covering multiple employees, the administrative burden is reduced for both employers and employees.
  3. Pre-existing conditions: Group policies may offer coverage for pre-existing medical conditions that would otherwise be excluded in individual policies. This can be a significant advantage for employees who may have existing health concerns.


Now that group income protection insurance is getting popular, it is easier for employers to protect their employees. Group income protection is also a cost-effective option; the premiums are lower and cover employees 24 hours a day. By getting group income protection insurance, they can continue to pay injured employees after sick leave expires. It is also a powerful tool to assist in the attraction of your company to future employees and to keep your existing, valued employees.


The Reality: Many Employers Don’t Provide Income Protection


Income protection insurance coverage among employers can vary, and it is important to acknowledge the reality that not all employers offer this benefit. In this segment, we will explore the reasons behind this and the implications for employees. Additionally, we will provide statistics and address the questions raised.


Income Protection – Is It My Decision or My Employer's-auw


Statistics on the lack of income protection insurance


Research indicates that a significant percentage of Australians do not hold income protection insurance. According to a 2017 report by independent researcher Rice Warner, only one-third (33%) of employed individuals in Australia possess income protection insurance.


Reasons why many employers do not offer income protection


There can be several reasons why employers choose not to provide income protection insurance. These reasons may include cost considerations, lack of awareness about the benefits, or a focus on other employee benefits. Additionally, some employers may assume that their employees already have personal coverage, leading to a perceived redundancy in offering group coverage.


Implications for employees without employer-provided income protection


The absence of income protection insurance through one’s employer can have significant implications for employees. Without this coverage, individuals may be left vulnerable to financial hardship in the event of illness, injury, or disability that prevents them from working. It places the responsibility on employees to secure their own income protection coverage to safeguard their financial well-being.


The Individual’s Responsibility toward Income Protection


While it is ideal for employers to provide income protection insurance, individuals need to take charge of their financial security and consider personal coverage even when their employer does not offer it.


The significance of individual income protection coverage


Income protection insurance is essential for individuals because it provides a safety net in case of unforeseen circumstances that affect their ability to work and earn an income. It offers financial support during periods of illness, injury, or disability, ensuring individuals can maintain their standard of living and meet their financial obligations.


Factors to consider when choosing an income protection policy


Coverage: Evaluate the scope of coverage provided by the policy, including the range of conditions and circumstances covered. Look for comprehensive coverage that encompasses a wide range of illnesses, injuries, and disabilities.

Waiting period: Determine the waiting period before benefits become payable. Consider your financial resilience and choose a waiting period that aligns with your needs.

Benefit period: Evaluate the duration for which the policy will provide benefits. Longer benefit periods offer extended coverage in case of long-term disabilities but may result in higher premiums.

Premiums: Assess the affordability of the premiums and ensure they fit within your budget. Consider the balance between the cost of the policy and the level of coverage provided.

Policy terms and conditions: Carefully review the policy terms, exclusions, and any additional features or benefits offered. Understand the requirements for filing claims and any restrictions that may apply.

These factors, along with exclusions, should be carefully considered when selecting an income protection policy.



Making the Decision: Income Protection is Your Responsibility


While employers play a significant role in providing income protection insurance, it is ultimately the responsibility of individuals to secure their own financial well-being. Here are the reasons why income protection should be the individual’s decision:


Personal financial security: Income protection insurance provides a safety net for individuals in case they are unable to work due to illness, injury, or disability. It ensures that individuals can maintain their standard of living, meet financial obligations, and protect their long-term financial goals.


Flexibility and customisation: When individuals take the initiative to choose their own income protection insurance, they have the flexibility to select a policy that best suits their needs. They can customise the coverage, waiting period, benefit period, and other policy features to align with their specific circumstances and preferences.


Comprehensive coverage: Personal income protection insurance can offer broader coverage compared to group policies offered by employers. It allows individuals to tailor the coverage to their occupation, lifestyle, and income level, ensuring that they have adequate protection.


Here are a few reasons why most Australians purchase income protection insurance:

  • Income protection will help you pay your debts, such as your mortgage, even if you don’t have income. It can ease the burden of managing your finances.
  • With income protection insurance, you can focus on your recovery without having to worry about expenses.
  • This insurance is also a great option for those who don’t wish to change their lifestyle when they are unable to work. Income protection insurance will minimise financial disruption so that you can maintain your quality of life.
  • Uncertainty is also one of the main reasons why people get income protection coverage. The risk of diseases such as stroke or cancer is significant, and we cannot shy away from the possibility.


Guidance on Choosing the Right Income Protection Insurance


Assess your needs: Start by evaluating your personal circumstances, including your income, financial commitments, and lifestyle. Consider factors such as your monthly expenses, debt obligations, and dependents. This assessment will help you determine the level of coverage you require.


Compare policy features: Review different income protection policies available in the market. Compare their coverage, waiting periods, benefit periods, and any additional features they offer. Look for policies that align with your specific needs and preferences.


Consider the waiting period: The waiting period is the time between the start of a disability and when the benefit payments begin. Evaluate your financial resilience and choose a waiting period that you can comfortably manage. Shorter waiting periods may result in higher premiums, so strike a balance based on your financial circumstances.


Evaluate benefit periods: Benefit periods define the duration for which the policy will provide benefit payments. Consider the length of time you would need financial support if you are unable to work due to illness, injury, or disability. Longer benefit periods provide more extended coverage but may come with higher premiums.


Understand policy exclusions: Carefully read and understand the policy exclusions. These are specific conditions or circumstances for which the policy will not provide coverage. Be aware of any pre-existing conditions or exclusions that may affect your eligibility for benefits.


Seek professional advice: It is highly recommended to consult with a qualified financial advisor or insurance professional. They can provide personalised guidance based on your unique circumstances, help you compare policies, and assist in making an informed decision.


When selecting an income protection insurance policy, consider the following factors:


How does income protection work in Australia?

Income protection insurance in Australia provides a regular income stream to individuals who are unable to work due to illness, injury, or disability. If you meet the policy’s eligibility criteria and have a valid claim, the insurance provider will pay a percentage of your pre-disability income as a monthly benefit.


Can you have two income protection policies in Australia?

Yes, it is possible to have multiple income protection policies in Australia. However, there may be limitations and conditions to consider, such as the total benefit amount you can receive from multiple policies and any coordination of benefits clauses that may apply. It is advisable to consult with insurance professionals to understand the implications and ensure appropriate coverage.


How is income protection calculated?

The calculation of income protection benefits in Australia varies depending on the policy. Generally, income protection benefits are based on a percentage of your pre-disability income, typically ranging from 75% to 85%. The specific calculation method will be outlined in the policy, taking into account factors such as your income, occupation, and any applicable waiting period.


What is the ratio for income protection?

The ratio for income protection refers to the percentage of your pre-disability income that is paid as a benefit under the policy. This ratio typically ranges from 75% to 85%, but it can vary depending on the specific policy and insurer. The chosen ratio will impact the premium cost, so consider your financial needs and affordability when selecting the appropriate ratio for your income protection policy.



In conclusion, income protection insurance is a critical aspect of securing one’s financial well-being in case of unexpected events that may prevent earning an income. If your company offers income protection insurance, then you don’t have to worry about it yourself. However, if they do not it is the right time to get yourself an income protection policy.

While employers can play a role in providing this coverage; individuals should take the initiative and consider it their personal responsibility. If you are an employer, you should consider getting group income protection for your employees now. Protecting valuable employees against illness and injury is essential to strengthening the partnership with employees and their families. This will also help you in increasing productivity and loyalty.


Here’s a recap of the key points discussed:

  • Income protection’s importance: It ensures financial stability during illness, injury, or disability, protecting one’s lifestyle, obligations, and long-term goals.
  • Individual’s role: Taking an active role in choosing income protection insurance is crucial. Assessing needs, selecting suitable coverage, and understanding policy terms ensures personalised protection.
  • Personal responsibility: Regardless of employer coverage, individuals must prioritise financial security. Obtaining appropriate coverage empowers proactive protection for oneself and loved ones.


In light of the information discussed in this article, I encourage readers to assess their income protection needs and take action accordingly. Conduct thorough research, compare available options, and consult with insurance professionals to make informed decisions. By doing so, individuals can gain peace of mind, knowing they have taken control of their financial security.


Remember, income protection is not just a benefit offered by employers; it is a vital component of personal financial planning. Don’t wait for circumstances to dictate your financial well-being – be proactive, take charge, and safeguard your future through income protection insurance.

Mike Wallis

Mike has over 25 years experience, having spent his first seven years working as a Broker at Jardine Lloyd Thomson in Melbourne and in 2002 was transferred to JLT’s Accident and Health Department in London. For four years (2002 – 2005) Mike was a specialist A&H Lloyd’s Broker and during this time developed excellent relationships with the Lloyd’s A&H underwriting fraternity. In 2006 he returned to Australia in a senior broking position with overall responsibility for Placement Strategy, including the implementation of underwriting facilities and the various authorities granted by Lloyd’s. Mike was the underwriter at two specialist Underwriting Agencies prior to founding Aspect Underwriting in 2016.