At a glance:

  • Income protection insurance is just as important as sick leave for working professionals.
  • Sick leave provides temporary coverage, while income protection insurance offers long-term financial security during periods of incapacity.
  • Income protection insurance ensures comprehensive coverage, higher income replacement, and flexibility tailored to individual needs.
  • Combining sick leave and income protection insurance provides a robust safety net for financial stability.



In today’s rapidly evolving Australian workforce, securing financial stability and protection is paramount for working professionals. While sick leave is a standard benefit offered by employers, there is a growing recognition that income protection insurance holds equal importance. This article delves into the question: Is income protection insurance as vital as sick leave? By exploring the advantages and limitations of both, we can gain a comprehensive understanding of the significance of income protection insurance in safeguarding individuals’ financial well-being during periods of incapacity.


Why Income Protection Insurance Is Just as Important as Sick Leave-aspect



Understanding the Basics


To fully comprehend the importance of income protection insurance alongside sick leave, it is crucial to understand the fundamental concepts of both.


Sick leave refers to the time off from work that employees are entitled to when they are unwell or injured. It is a benefit provided by employers, allowing employees to take paid time off to recover without facing a loss of income. Sick leave policies may vary among organisations, with different rules regarding accrual, usage, and eligibility.


On the other hand, income protection insurance is a type of coverage that provides financial support in the event of incapacity due to illness or injury. It offers a regular income payment, typically a percentage of the individual’s pre-tax earnings, during their period of inability to work. Unlike sick leave, income protection insurance is not limited to specific employment arrangements and provides coverage beyond the scope of work-related incidents.


The concept of sick leave has been an integral part of workplace policies for many years, recognizing the need to support employees during times of illness. However, income protection insurance has evolved over time to address the limitations of sick leave and provide more comprehensive financial protection.


While sick leave is undoubtedly valuable, it may not always be enough to cover the full extent of financial needs during a prolonged absence from work. Sick leave policies have limitations on duration, accrual, and may not provide full income replacement. This can leave individuals vulnerable to financial strain if their incapacity extends beyond the scope of their sick leave entitlements.


In such situations, income protection insurance becomes essential as it fills the gaps left by sick leave. It offers a broader scope of coverage, providing a continuous income stream to individuals during extended periods of incapacity. By understanding the limitations of sick leave and the additional benefits offered by income protection insurance, individuals can ensure comprehensive financial protection and peace of mind during times of illness or injury.



Income protection insurance vs Sick Leave.  Do I need income protection insurance if I have sick leave?


Is income protection important? The answer is a resounding yes. While sick leave provided by employers is valuable and helps employees manage short-term illness or injury, it may not be sufficient for more prolonged periods of incapacity. Income protection insurance serves a vital role in ensuring long-term financial security in the face of unexpected health issues.


Having sick leave is undoubtedly beneficial, as it allows employees to take time off work and still receive income during their recovery. However, sick leave policies often have limitations in terms of duration, accrual, and the level of income replacement. In cases where individuals experience extended periods of incapacity, such as prolonged illnesses or recovery from severe injuries, the financial support provided by sick leave may not be enough to cover all the expenses and financial obligations.


This is where income protection insurance comes into play. It offers a comprehensive safety net by providing a portion of the individual’s income during incapacity due to illness or injury. This regular income stream allows individuals to maintain their financial commitments, cover living expenses, and support their families during times when they are unable to work.


Income protection insurance goes beyond the limitations of sick leave, offering a broader scope of coverage. It ensures that individuals can sustain their lifestyle and meet financial obligations even when their sick leave entitlements have been exhausted. By providing ongoing financial support, income protection insurance provides a sense of security and peace of mind, allowing individuals to focus on their recovery without the added stress of financial strain.


It is important to note that income protection insurance is not intended to replace sick leave. Instead, it complements sick leave by providing a more comprehensive and long-term solution to income replacement. The combination of sick leave and income protection insurance offers a robust safety net, safeguarding individuals against the financial consequences of extended periods of incapacity.



Advantages of Sick Leave


Income Replacement: Sick leave allows employees to continue receiving their regular income while taking time off work due to illness or injury. This helps alleviate financial stress and ensures individuals can meet their financial obligations during their absence.


Job Security: Sick leave provides job security by allowing employees to take time off work without the fear of losing their position or facing negative consequences. It protects employees from being penalised or discriminated against for taking necessary time off to recover.


Health and Well-being: Sick leave promotes the well-being and health of employees by allowing them to rest and recuperate when they are unwell. It enables individuals to prioritise their health and take the necessary time to recover fully.



Limitations of Sick Leave


Limited Duration: Sick leave is typically provided for a specific number of days or weeks per year, depending on the employer’s policy. Once these days are exhausted, employees may be required to take unpaid leave or rely on other forms of income replacement.


Accrual Requirements: Many sick leave policies require employees to accrue sick leave over time. This means that new employees or those who have recently used their sick leave may have limited or no sick leave available to them.


Partial Income Replacement: Sick leave often provides partial income replacement, typically a percentage of the employee’s regular salary. This may not fully cover all living expenses, especially for employees with significant financial obligations or those who rely heavily on overtime or bonuses.


Documentation and Approval Process: Employers may require employees to provide medical documentation or obtain approval for sick leave, which can be time-consuming and may require additional effort during an already challenging period of illness.



Advantage of having Income Protection Insurance


  • Comprehensive coverage for a wide range of illnesses and injuries.
  • Higher income replacement, typically up to 85% of pre-illness or pre-injury income.
  • Long-term coverage, lasting for years or until retirement age.
  • Flexibility and customization options to tailor the coverage to individual needs.
  • Additional benefits such as rehabilitation support and optional riders.
  • Peace of mind, continuity, and security in meeting financial obligations.
  • Enables individuals to maintain their lifestyle and plan for the future.


Why Income Protection Insurance Is Just as Important as Sick Leave aspect



Scenarios: Sick Leave vs. Income Protection Insurance


Serious Illness or Injury: Imagine a professional in their 30s or 40s who suffers a serious illness or injury that requires a long recovery period. Sick leave may cover a portion of their income for a limited time, but income protection insurance provides a more comprehensive solution, offering long-term coverage that ensures financial stability during the recovery phase.


Chronic Health Condition: For professionals managing a chronic health condition that frequently requires time off work, sick leave alone may not be sufficient. Income protection insurance can provide ongoing income replacement, allowing individuals to manage their health condition without worrying about income loss or financial strain.


Family Responsibilities: In scenarios where professionals have family responsibilities, such as dependents or mortgages, sick leave alone may not adequately support their financial obligations. Income protection insurance offers a higher level of income replacement, ensuring that they can continue to meet their family’s needs and maintain financial security.


Career and Income Growth: Professionals in their 30s and 40s often strive for career advancement and increased income. In such cases, sick leave benefits may not keep pace with their growing income. Income protection insurance provides income replacement based on their higher earnings, safeguarding their lifestyle and financial aspirations.


Unforeseen Circumstances: Life is unpredictable, and unforeseen circumstances can disrupt one’s ability to work. Without sick leave or income protection insurance, individuals may face significant financial hardships during unexpected incapacity, affecting their short-term and long-term financial well-being.



Can I claim income protection if I have sick leave?


While sick leave and income protection insurance serve different purposes, they can complement each other in certain situations. Here’s how they work together:


Sick Leave as the Initial Support: Sick leave is designed to provide temporary coverage when you are unable to work due to illness or injury. It allows you to take time off work and still receive a portion of your income for a limited duration. During this period, you can utilise your sick leave benefits to manage your immediate financial needs.


Transition to Income Protection Insurance: If your incapacity extends beyond the duration covered by your sick leave, income protection insurance becomes crucial. Income protection insurance provides long-term coverage, offering a percentage of your pre-illness or pre-injury income during extended periods of incapacity. It ensures continuous financial support when your sick leave benefits expire.


Enhanced Financial Security: By combining sick leave and income protection insurance, you create a more comprehensive safety net. Sick leave provides short-term support, while income protection insurance offers ongoing income replacement, helping you maintain your financial stability and meet your financial obligations during longer periods of incapacity.


Coordination and Policy Terms: It’s important to note that specific policy terms and conditions may impact your ability to claim both sick leave and income protection insurance simultaneously. Some income protection insurance policies require you to exhaust any available sick leave before receiving benefits. Others may coordinate with sick leave benefits to avoid overcompensation. It’s crucial to review the terms of your income protection insurance policy and consult with your insurer to understand how sick leave and income protection insurance work together.




By offering comprehensive coverage, higher income replacement, and flexibility tailored to individual needs, income protection insurance fills the gaps left by sick leave. It provides continuous financial support, allowing individuals to maintain their lifestyle, meet financial obligations, and plan for the future. The combination of sick leave and income protection insurance creates a robust safety net, safeguarding individuals against the financial consequences of extended periods of incapacity.


When it comes to income protection insurance, Aspect Underwriting is your trusted partner. We understand the unique challenges faced by working professionals and offer tailored solutions to meet their specific needs. With our expertise, guidance, and commitment to customer satisfaction, we strive to be the go-to place for income protection insurance. Choose Aspect Underwriting as your trusted partner in securing your financial future.


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.