Income Protection Insurance in Australia

Let us understand everything you need to know about income protection insurance in Australia, including its features, tax benefits, claim process, and how term insurance plans can act as salary protection insurance.

What is Income Protection Insurance?

Income protection insurance in Australia helps you manage your financial obligations if you’re unable to work due to illness or injury. It replaces a portion of your pre-tax income for a specified period, ensuring that essential expenses like rent, mortgage, and daily bills can still be covered.

What Does Income Protection Insurance Cover?

Income protection insurance can cover:

• Up to 90% of your pre-tax income in the first six months

• Up to 70% of your pre-tax income for a longer period thereafter

Each policy has its own definition of partial or total disability, which must be met to make a claim. These definitions and any exclusions are generally detailed in the insurer’s Product Disclosure Statement (PDS).

Who Needs Income Protection Insurance?

You may need payment protection insurance if you:

• Are self-employed or run a small business with no access to sick leave

• Have dependents or family members relying on your income

• Have a mortgage or other financial commitments

Preparing a personal budget based on Australian household income is a helpful first step to assess how much income protection you may require.

Tax Benefits on Salary Protection Insurance Premiums

According to the Australian Taxation Office (ATO):

• Only the portion of premiums paid to protect employment income (salary and wages) is tax-deductible.

• If you receive payments under an income protection policy, whether lump sum or regular payments, they must be included in your tax return.

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You cannot claim deductions for:

• Premiums paid via your superannuation fund contributions

• Life insurance, trauma, or critical illness insurance

Key Points to Consider When Choosing a Payment Protection Insurance Policy

Important Disclosures When Applying for Salary Protection Insurance

To buy a salary protection insurance, you need to provide the following details:

• Age and occupation

• Income details (salary, commissions, etc.)

• Medical history

• Lifestyle choices (e.g., smoking status, risky hobbies)

Providing complete and honest answers is essential to avoid claim rejections or policy cancellations.

How to File a Salary Protection Insurance Claim?

If you need to file a salary protection or income replacement insurance claim:

• Notify your insurer promptly

• Submit necessary medical and employment documents

• Include any payment received under income protection in your tax return

Income Protection Insurance vs. Term Insurance

While payment protection insurance helps replace your salary temporarily, term life insurance offers broader and longer-term financial security. A term insurance policy can:

• Pay out a lump sum or offer a monthly income stream to your family

• Replace your long-term earning capacity in case of death

• Help cover outstanding debts, education, and living expenses for dependents

Why Buy Term Insurance for NRIs from India via Policybazaar?

If you're an NRI residing in Australia, Policybazaar offers tailored term insurance plans from Indian insurers that provide:

• Dedicated claim support for the family in case of your unfortunate death during the policy term

• You can claim term insurance GST waiver for NRI premiums paid via NRE (Non-residential External) bank accounts

• Global coverage with pre-approved cover that offers benefits no matter where you are geographically

• The term life insurance quotes are much more affordable in India compared to international term plans

• Tele or video medical facility in term insurance allows NRIs to clear their medicals without visiting India

You can also link your coverage with home loan obligations back in India, ensuring your family retains their home in your absence.

How to Buy Term Life Insurance for NRIs from Indian Insurers?

Here is how you can buy term life insurance for NRIs from India:

Step 1: Visit the term insurance for NRI page of Policybazaar

Step 2: Enter your basic details like name, gender, contact information, and country 

Step 3: Choose the right smoking habits, occupation type, annual income, and educational qualifications

Step 4: Select the best term insurance for income protection and proceed to pay

Wrapping it Up!

Income protection insurance in Australia serves a critical function in safeguarding your income during periods of temporary disability. However, pairing it with a comprehensive term insurance plan, especially for NRIs, can provide comprehensive financial protection for your family, both in Australia and back in India.