Income Protection FAQs

Question 1

What is Income Protection Insurance and how does it work?

Accepted Answer

**Income Protection (IP) pays a monthly benefit when illness or injury stops you working.** It replaces up to 70% of pre-disability income, after a chosen waiting period, for a set benefit period or until you recover.

Every retail IP contract on IMFL's panel was issued after APRA's October 2021 reforms, so the 70% cap, indemnity-only structure, and 24-month income reset apply across the board. The panel is AIA, Zurich, TAL, OnePath, ClearView, NEOS, Encompass, Acenda, and Futura.

## How the mechanics fit together

1. You pick a waiting period (the gap between disablement and first payment).
2. You pick a benefit period (the maximum payment runway: 2 years, 5 years, or to age 65).
3. Illness or injury occurs. You stop work and start treatment.
4. After the waiting period ends and the insurer accepts the claim, monthly benefits begin.
5. Payments continue until you recover, the benefit period ends, or the policy's other limits engage (such as the mental-illness sub-limit if relevant).

## Where each panel insurer documents the 70% cap

- **AIA Priority Protection PDS** (Version 32, 9 November 2025), Section 5.1.2 (Built-in Benefits): 70% of monthly Pre-disablement Income at the time of becoming Totally or Partially Disabled.
- **TAL Accelerated Protection PDS** (12 December 2024), Section 2.6: 70% of the first $25,000 per month ($300,000 per annum) of your Earnings.
- **Zurich Wealth Protection PDS** (1 November 2025), Income Protection section: You can insure up to 70%, tiered above $240,000.
- **OnePath OneCare PDS** (October 2025), Income Secure Cover: 70% of the first $300,000 of annual income as at the Cover start date.
- **ClearView ClearChoice PDS** (13 May 2024, update 5 June 2025), Income Protection Flex (IP70): 70% of your pre-disability earnings.
- **NEOS Protection PDS** (6 December 2024), Income Support Cover: 70% of the first $25,000 per month of your regular income.
- **Encompass Protection PDS** (26 September 2025), Income Protection Cover: 70% of your first $240,000 of annual pre-disability earnings, divided by 12.
- **Acenda Insurance PDS** (27 September 2025), Income Protection: 70% of your Earnings Before Disability (then 20% on the next band for 6 months).
- **Futura Protection PDS** (1 October 2025), Income Protection Cover: 70% of the first $25,000 per month of your regular income.

## What IP is not

IP is not a lump-sum product. TPD and Trauma pay once. IP pays monthly, and only while you remain unable to work under the policy's definition. IP is also not redundancy cover: you must be unable to work due to illness or injury, not because you have lost your job.

## Regulator anchor

The 70% cap, the 24-month income reset, and the indemnity-only structure all flow from APRA's Information Paper *Individual Disability Income Insurance*, October 2021. The Insurance Contracts Act 1984 governs the contract itself.

Question 2

What percentage of my income can I insure with Income Protection?

Accepted Answer

**Income Protection replaces up to 70% of your gross pre-disability income.** APRA's October 2021 Individual Disability Income Insurance (IDII) reforms set this cap for every new retail policy issued by panel insurers.

## Why the cap exists

APRA introduced the 70% cap to keep a financial incentive to return to work. The rule prevents insurers from putting you in a better post-tax position when disabled than when working. The full framework sits in the APRA Information Paper *Individual Disability Income Insurance* (October 2021), published at apra.gov.au.

The 70% applies to gross income before tax. Benefits paid outside super are taxable as ordinary income, and premiums paid from personal cash are generally deductible under ITAA 1997 s8-1 (see ATO TR 95/35).

## How each panel insurer applies the cap

The headline rate is 70% across all 9 panel insurers, but most apply a tiered (sliding-scale) structure to high earners. Income above a threshold is replaced at a lower rate, again to preserve the return-to-work incentive.

| Insurer | Replacement structure | PDS reference |
|---------|----------------------|---------------|
| **AIA** | 70% of first $20,000 monthly pre-disablement income, then tiered above | Income Protection CORE, Section 5.1.2 (PDS 9 Nov 2025) |
| **TAL** | 70% of first $25,000 per month ($300,000 p.a.) | Section 2.6 (PDS 12 Dec 2024) |
| **Zurich** | 70% of first $240,000 p.a., 50% of next $60,000 | Section: Income protection (PDS 1 Nov 2025) |
| **OnePath** | 70% of first $300,000 of annual income at Cover start | Income Secure Cover (PDS Oct 2025) |
| **ClearView** | 70% pre-disability earnings (Income Protection Flex IP70); IP60 variant available | Income Protection, Section (PDS 13 May 2024, Update 5 Jun 2025) |
| **NEOS** | 70% of first $25,000 per month of regular income | Income Support Cover (PDS 6 Dec 2024) |
| **Encompass** | 70% of first $240,000 p.a. pre-disability earnings, divided by 12 | Income Protection cover (PDS 26 Sep 2025) |
| **Acenda** | 70% of first $240,000 Earnings Before Disability; 20% next band for 6 months only | Income Replacement Ratio Amount (PDS 27 Sep 2025) |
| **Futura** | 70% of first $25,000 per month of regular income | Income Protection Cover (PDS 1 Oct 2025) |

## What counts as insurable income

For PAYG employees, base salary plus regular bonuses, commissions and overtime averaged over 12 months is the usual basis. Investment income, rental income, and one-off windfalls are generally excluded.

For self-employed earners, insurable income is net business income after deductible business expenses but before personal income tax. The exact definition varies by insurer, so check the PDS for the version that applies to your income mix.

## What this means in practice

If you earn $120,000 gross, the maximum monthly benefit is $7,000 (70% of $10,000). Super-fund IP (salary continuance) sits inside the same APRA framework and is also capped at 70%.

Pre-October 2021 policies sometimes carried higher replacement ratios (up to 75% or more) under the old framework. Those legacy contracts may continue under their original terms, but new policies cannot match them. This is general information, not personal advice.

Question 3

What is a waiting period and which one should I choose?

Accepted Answer

**The waiting period is the gap between disablement and your first monthly payment.** It is the deductible portion of an IP claim, and the longer you choose, the lower the premium.

Panel insurers offer waiting periods from 14 days at the short end to 2 years at the long end. Most retail policies sold sit at 30, 60, or 90 days. You serve the waiting period using sick leave, savings, employer disability schemes, or any other resource that bridges the gap.

## Waiting period options across the panel

| Insurer | Available waiting periods |
|---|---|
| AIA | 14, 30, 60, 90 days, up to 2 years for some structures |
| Zurich | 4, 8, 13, 26 weeks, or 2 years |
| TAL | 4 weeks, 13 weeks, plus 30, 60, 90 days and 2 years |
| OnePath | 30, 60, 90 days, 1 year, 2 years (5 years for some structures) |
| ClearView | 30, 60, 90 days, plus 2 years for restructured cover |
| NEOS | Standard 30, 60, 90 days, plus 2 years |
| Encompass | Standard short waits, plus 2-year option with Two Year Waiting Period Reduction Benefit |
| Acenda | 14, 30 days standard, plus 2 years |
| Futura | 30, 60, 90 days, or 2 years |

See **AIA Priority Protection PDS** (Version 32, 9 November 2025), waiting period section; **Zurich Wealth Protection PDS** (1 November 2025), Income protection section; **TAL Accelerated Protection PDS** (12 December 2024), Section 2.6.1; **Acenda Insurance PDS** (27 September 2025); **Futura Protection PDS** (1 October 2025).

## How the choice affects premium and claim

A shorter waiting period (14 or 30 days) is paid for in higher premiums but pays out earlier. A 90-day or longer waiting period is the standard cost-saver because most short-term claims (under three months) fall away. The two-year option is the cheapest, and it is the option most often paired with retail IP that sits behind employer salary continuance or substantial sick-leave buffers.

## Common considerations when choosing

- **Sick-leave entitlement**: If you accrue 10 to 20 paid sick days per year and have a partner's income, a 30-day waiting period might fit.
- **Liquid savings**: With 3 to 6 months of expenses saved, a 60- or 90-day wait reduces premium materially.
- **Self-employed**: No sick leave means a shorter wait (14 to 30 days) often makes sense, even at higher premium.
- **Group cover behind retail**: If you have employer-provided salary continuance for the first 90 days, pairing it with a 90-day or 2-year retail wait avoids paying twice for the same window.

## Consecutive versus aggregate

A consecutive waiting period requires unbroken disability. Return to work for one day during a 30-day consecutive wait and the clock restarts. An aggregate waiting period totals up qualifying days within a defined window (often 60 or 90 days) and is more forgiving for conditions with flare-ups. Most modern panel PDSs default to or offer aggregate. See **TAL Accelerated Protection PDS** Section 2.6 and the consecutive-versus-aggregate FAQ for the structural distinction.

Question 4

What is a benefit period and how long should it be?

Accepted Answer

**The benefit period is the maximum time an insurer keeps paying your monthly benefit while you remain disabled.** Common options across the panel: 2 years, 5 years, to age 65, and on some products to age 70.

Longer benefit periods cost more because the insurer carries a longer claim-payment risk. The choice between 2 years and to age 65 can double or triple the premium for an equivalent benefit amount.

## How long do panel insurers go?

| Insurer | Benefit period options | PDS reference |
|---------|-----------------------|---------------|
| **AIA** | 2 year, 5 year, to age 65, to age 70 (CORE Flat 70% is to age 65 only) | Section 5 footnotes (PDS 9 Nov 2025) |
| **TAL** | 1 year, 2 years, 5 years (IP Focus); to age 65 on higher tiers | Section 2.6 (PDS 12 Dec 2024) |
| **Zurich** | 2 years, 5 years, to age 65 | Section: Income protection (PDS 1 Nov 2025) |
| **OnePath** | 2 years, 5 years, to age 65; specific waiting/benefit combinations | Income Secure Cover (PDS Oct 2025) |
| **ClearView** | To age 65 standard; CC2 (2-year cap) or CC5 (5-year cap) for certain occupations | Income Protection (PDS 13 May 2024, Update 5 Jun 2025) |
| **NEOS** | 5-year option with 2-year waiting period documented; standard options also available | Income Support Cover (PDS 6 Dec 2024) |
| **Encompass** | To age 65 with 2-year waiting period referenced via Two Year Waiting Period Reduction Benefit | Income Protection cover (PDS 26 Sep 2025) |
| **Acenda** | 2-year option paired with longer benefit periods | Income Replacement (PDS 27 Sep 2025) |
| **Futura** | 5-year benefit period with 2-year waiting; standard options also available | Section: Income Protection (PDS 1 Oct 2025) |

APRA's October 2021 IDII reforms also restricted some heavy-manual occupation classes to shorter benefit periods (often 2 or 5 years) regardless of insurer.

## What to weigh up

The right benefit period depends on three things: your debts, your dependants, and your buffer of savings or other income. The trade-off looks like this.

### Choose a longer benefit period if you have

- A mortgage or other long-term debt that would default after 2 years of no income
- Dependants who rely on your income through their childhood or your full working life
- Limited emergency savings or partner income
- A career where serious illness (cancer, severe mental illness, MS, chronic pain) could prevent work for many years

### Consider a shorter benefit period if you have

- Substantial liquid assets or investment income to fall back on
- A working partner who can carry household costs
- A short remaining working life (within 5-10 years of retirement)
- A clear plan to self-insure beyond the 2 or 5 year window

## What the 24-month income reset adds

For post-October 2021 contracts, the insurer recalculates your monthly benefit after 24 months on claim. The new amount is based on what someone in your role would now earn, not your original pre-disability income (APRA Information Paper, October 2021). This means a longer benefit period also exposes you to potential benefit changes after the 2-year mark. Pre-2021 legacy policies typically do not have this reset.

## Practical guidance

Most brokers will model the cost difference between 2-year, 5-year, and to age 65 on a single quote so you can see the trade-off in dollar terms. A common middle ground for working-age adults with a mortgage and dependants is to age 65 with a longer waiting period (60 or 90 days) to keep premium manageable. This is general information only, not a personal recommendation. Discuss your circumstances with a licensed adviser before deciding.

Question 5

Are Income Protection insurance premiums tax deductible?

Accepted Answer

**Yes. Personally paid Income Protection premiums are generally deductible under ITAA 1997 s8-1. Benefits are assessable as income.** The deductibility test rests on the premium being incurred to produce assessable income (the IP benefit itself).

The rule is general advice. Your specific tax position depends on how the cover is owned, how you pay premiums, and any structuring through a business or super. Always confirm with your accountant or refer to the ATO directly.

## The ATO position

The Australian Taxation Office sets out the deductibility position in:

- **ATO Taxation Ruling TR 95/35** (Income tax: deductibility of income protection insurance premiums)
- **ATO Taxation Ruling TR 85/36** (Income tax: receipts of insurance proceeds)
- **ITAA 1997 s8-1** (General deductions)
- ATO website page *Insurance premiums - income protection*

The core principle: premiums for an insurance policy that produces assessable income (a taxable monthly benefit) are deductible because they are an expense incurred to produce that assessable income. Benefits, being assessable income, are taxed at the claimant's marginal rate in the year received.

## Owning IP personally (outside super)

- Premiums paid from after-tax income are generally deductible to the individual.
- Benefits paid to the individual are assessable income and taxed at marginal rates.
- This is the standard structure for retail IP on the panel.
- The deduction reduces the effective after-tax premium cost. Worked example: a $2,500 annual premium for a person in the 37% marginal bracket has an effective after-tax cost of about $1,575.
- Lodge the deduction in your tax return under the 'Income protection insurance' label.

## Owning IP inside super

- Premiums are funded from the super balance, often using pre-tax employer or salary-sacrifice contributions.
- Personal premium deduction is not available (you have not paid out of pocket).
- The super-fund trustee may claim the deduction inside the fund.
- Benefits paid to your super account may be taxable when accessed, depending on age and component (taxable versus tax-free).
- This structure suits clients constrained on cash flow but adds tax complexity at claim time.

## What is excluded from the deduction

- The portion of a combined premium attributable to Life or TPD cover (lump-sum risk is not deductible to the individual).
- The portion attributable to Trauma cover (also non-deductible).
- Riders that provide non-income benefits (some specified-injury or critical-event lump sums).

Most panel insurers issue annual premium-paid statements separating the IP component from any combined cover. Use that statement at tax-return time. The statement is the substantiation document if the ATO asks.

## Where the panel PDSs sit on tax

No panel PDS makes tax representations. Each refers you to the ATO. **TAL Accelerated Protection PDS** (12 December 2024) says please visit www.ato.gov.au for more information. **AIA Priority Protection PDS** (Version 32, 9 November 2025), **Zurich Wealth Protection PDS** (1 November 2025), and others follow the same disclaimer pattern: the tax position is your responsibility to confirm with a registered tax agent.

## What changes the answer

- **Self-employed or business-owned IP**: deductibility flows through the business entity. Different rules apply to companies, trusts, sole traders, and partnerships.
- **Combined-cover policies**: only the IP portion deducts. The insurer's premium statement separates the components.
- **Salary continuance through group super**: trustee claims the deduction, not you.
- **Benefits later assessed as compensation**: rare, but if a benefit is paid as a lump-sum compromise on commutation, the tax treatment may differ from monthly benefit treatment.

## Practical takeaways

1. Get the insurer's annual premium statement separating IP from any other cover.
2. Lodge the IP-only premium amount as a tax deduction.
3. If you start a claim, expect monthly benefit payments to be PAYG-withheld at source or to require quarterly tax payments via your tax agent.
4. Speak to your accountant or check the ATO website if your cover is structured through a business, super, or trust.

Question 6

What's the difference between Agreed Value and Indemnity Income Protection policies?

Accepted Answer

**New Agreed Value policies are no longer sold in Australia. Since 31 March 2020, all newly issued retail Income Protection contracts are indemnity-based, later confirmed by APRA's October 2021 IDII reforms.** Existing pre-2020 Agreed Value contracts may continue under their original terms.

## The two structures

### Agreed Value (historical, no new policies)

Under an Agreed Value policy, you and the insurer fixed your monthly benefit at application time based on your income then. At claim time, the insurer paid the agreed amount regardless of your current earnings. This gave certainty to commission-based, self-employed, or variable-income workers whose earnings might drop between application and claim.

### Indemnity (the only structure available for new business)

Under an indemnity policy, your monthly benefit is calculated at claim time from your actual recent earnings. The lookback is typically the highest consecutive 12 months in the 2-3 years before disability, depending on insurer. The sum insured on your schedule is a maximum, not a guaranteed payment.

## What APRA changed and why

APRA issued a Letter to All Life Insurers in December 2019 and again in May 2020, citing $5+ billion in industry IP losses over five years. The May 2020 letter banned new Agreed Value contracts from 31 March 2020. The October 2021 IDII Information Paper consolidated the framework: indemnity-only, 70% replacement cap, mandatory 24-month income reset for long-running claims (apra.gov.au).

## How each panel PDS reflects this

| Insurer | Structure | PDS evidence |
|---------|-----------|---------------|
| **AIA** | Indemnity Only and Extended Indemnity columns; Agreed Value only available when replacing existing Priority Protection Agreed Value cover | Section 5, PDS 9 Nov 2025 |
| **TAL** | Indemnity is the default for Accelerated Protection | Section 2.6 (PDS 12 Dec 2024) |
| **Zurich** | "This policy provides indemnity cover" stated explicitly | Section: Income protection (PDS 1 Nov 2025) |
| **OnePath** | Indemnity benefit payment is the contract default | Income Secure Cover (PDS Oct 2025) |
| **ClearView** | Indemnity is the default; business expenses also indemnity | Income Protection (PDS 13 May 2024, Update 5 Jun 2025) |
| **NEOS** | Indemnity only; no Agreed Value option in PDS | Income Support Cover (PDS 6 Dec 2024) |
| **Encompass** | Indemnity only by absence of Agreed Value clause | Income Protection cover (PDS 26 Sep 2025) |
| **Acenda** | Indemnity cover defined; "Income Replacement Ratio Amount" basis | Glossary (PDS 27 Sep 2025) |
| **Futura** | Indemnity only by absence of Agreed Value clause | Income Protection Cover (PDS 1 Oct 2025) |

## What this means if your income varies

The loss of Agreed Value mostly affects commission earners, sole traders, contractors, and people whose income trajectory may dip. Under indemnity, the recent earnings test means a bad 12 months before a disability claim could reduce your payable benefit even if your sum insured is higher.

Three practical responses are available under current contracts.

- **Best 12 of 24 (or 36) months test**: some insurers use the highest consecutive 12 months in the lookback window, smoothing out a one-off bad year. Check the PDS for the exact lookback.
- **Income link / income protection lock options**: a few insurers let you re-disclose your higher historical income at points during the policy, locking in a higher benefit basis. Availability and rules vary.
- **Maintain income records**: keep tax returns, BAS, profit-and-loss statements, and contracts so you can substantiate higher pre-disability income at claim time.

## If you hold a pre-2020 Agreed Value policy

Do not let it lapse without understanding what you lose. New replacement cover under post-2021 rules cannot match the Agreed Value structure. Discuss any change with a licensed adviser before cancelling legacy cover. This is general information, not personal advice.

Question 7

How much does Income Protection insurance typically cost?

Accepted Answer

**IP premium varies by age, gender, occupation class, smoking status, waiting period, benefit period, monthly benefit, and optional features.** A 35-year-old white-collar non-smoker insuring $5,000 per month with a 90-day wait to age 65 will pay materially less than a 50-year-old manual worker with a 30-day wait. Quotes are the only way to size the actual cost.

IMFL's quote engine pulls live rates from each panel insurer using your specific occupation, age, and structure. Below is the framework of what drives the number.

## The seven main premium drivers

### 1. Age

The single largest factor. Premiums rise steeply through your 40s and 50s as disability claim probability rises. A 30-year-old quote and a 50-year-old quote for the same cover can differ by 200% or more.

### 2. Gender

Women typically pay more for IP than men at younger ages, reflecting historical claims experience. The differential narrows with age.

### 3. Occupation class

Each panel insurer publishes an occupation guide. Class codes range from professional (P1, P2) at the lowest premium to heavy-manual (M, X) at the highest. The class drives both premium and which benefit periods are available. ClearView explicitly restricts CC2 and CC5 classes to 2- or 5-year benefit periods. See **ClearView ClearChoice PDS** (13 May 2024, update 5 June 2025), occupation guide.

### 4. Smoking status

Non-smokers pay materially less than smokers across all panel insurers. The differential is significant: often 30-50% on a like-for-like quote.

### 5. Waiting period

Shorter waiting periods cost more. A 30-day wait costs materially more than a 90-day wait. A 2-year wait is the cheapest option on the panel. See **AIA Priority Protection PDS** (Version 32, 9 November 2025) and **Zurich Wealth Protection PDS** (1 November 2025) on waiting-period options.

### 6. Benefit period

Longer benefit periods cost more. A 2-year benefit period is materially cheaper than a to-age-65 benefit period for the same monthly amount. The cost difference reflects the insurer's expected lifetime claim exposure.

### 7. Optional features

Increasing Claim Option (in-claim CPI escalation), Super Contribution Option (employer SG paid while on claim), Day 1 Accident Benefit, Specified Injury Benefit. Each option adds a percentage to the base premium. See **AIA Priority Protection PDS** Section 7 (Built-in and Optional Benefits); **TAL Accelerated Protection PDS** (12 December 2024) Section 2.6.3.

## Premium structures

### Stepped premiums

The default on most panel contracts. Premium recalculates at each policy anniversary based on your current age. Starts cheap. Rises steeply in later years.

### Level premiums

Flat for a defined period or until a stated age (often 65). Starts higher than stepped. Cheaper in aggregate if you hold the policy for many years.

### Variable Age-Stepped (Zurich, AIA terminology)

A stepped structure that also tracks insurer-driven rate changes. See **Zurich Wealth Protection PDS** (variable age-stepped premium structure).

The choice between stepped and level is a separate decision worth modelling against your expected holding period. A long-term policyholder may save with level premiums even though the up-front cost is higher.

## Where premium statements are documented

Each panel PDS sets out premium calculation rules:

- **AIA Priority Protection PDS** (Version 32, 9 November 2025), Section 7 (Premium structure)
- **Zurich Wealth Protection PDS** (1 November 2025), variable age-stepped section
- **TAL Accelerated Protection PDS** (12 December 2024), premium section
- **OnePath OneCare PDS** (October 2025), How premiums are calculated
- **ClearView ClearChoice PDS** (13 May 2024, update 5 June 2025)
- **NEOS Protection PDS** (6 December 2024)
- **Encompass Protection PDS** (26 September 2025)
- **Acenda Insurance PDS** (27 September 2025)
- **Futura Protection PDS** (1 October 2025)

## How the panel compares on premium

For an identical cover structure, panel premiums can vary by 30-50% between the cheapest and most expensive insurer. The cheapest is not always the right pick because definitions, mental-illness handling, and occupation-class treatment differ (see the FAQ on comparing IP policies). Comparing 3-5 insurers across IMFL's panel for your specific structure is the practical approach.

## What is illustrative, not personal advice

Any premium range cited here is illustrative. Your actual quote depends on your specific age, gender, occupation class, smoking status, health history, structure choices, and the insurer underwriting your cover. Use a licensed adviser to walk through the panel quotes side-by-side under general advice.

Question 8

What does 'unable to work' or 'totally disabled' mean in Income Protection policies?

Accepted Answer

**Most retail Income Protection policies test 'own occupation' for the first 24 months on claim, then tighten to 'any occupation' for which you are reasonably suited.** The disability definition decides whether a claim is paid, so it sits at the centre of every IP contract.

The definitions below all sit within Australian retail IP contracts issued under APRA's October 2021 reforms. Direct (DTC) IP and group salary continuance use different wording. Check your own policy schedule before relying on any general statement.

## Stage 1: the first 24 months on claim

During the first 24 months of benefit payments, retail panel insurers test whether illness or injury stops you performing the *important and substantial duties* of your own occupation. You can still claim while doing some lighter work, provided you are not fully capable of your usual role.

- **AIA Priority Protection** (Version 32, 9 November 2025): Income Protection CORE uses an own-occupation 'Material Daily Duties' test for the first 24 months of the benefit period (Section 5).
- **TAL Accelerated Protection** (12 December 2024): the Glossary entry for 'Totally Unable to Work' applies own-occupation wording during the first 24 months, with treatment compliance required (Section 9).
- **Zurich Wealth Protection** (1 November 2025): 'Total disability' and 'Partial disability' definitions apply for the first 24 months (Income Protection section).
- **OnePath OneCare** (October 2025): 'In the first 2 years on claim, we will calculate monthly income based on what...' (Income Secure Cover).
- **NEOS Protection** (6 December 2024): the regular-occupation test applies up to 24 months (Income Support Cover).

## Stage 2: after 24 months on claim

After the 24-month mark, most policies switch to an 'any occupation' test. The benefit continues only if you cannot work in any occupation for which you are reasonably suited by education, training, or experience.

- **TAL**: Section 9 confirms 'Occupation will be replaced with Any Occupation' after 24 months.
- **OnePath**: 'After two years on claim, assessment of disability will not be based on the' regular occupation.
- **Encompass Protection** (26 September 2025): after 24 months on the 'any' definition for the relevant waiting-period combination (Income Protection Cover).
- **Futura Protection** (1 October 2025): the 24-month definition transition appears.

Some higher-tier plans hold the own-occupation test for the full benefit period at a premium cost. AIA's IP Advantage and IP PLUS variants document this option (Section 5 footnotes).

## Why the definition decides everything

A surgeon who loses fine hand control cannot operate (own-occupation disabled) but may still teach (any-occupation capable). For the first 24 months the surgeon claims; after that the surgeon may not. This single switch is the most common reason a long-duration claim ends. Discuss the trade-off with a licensed adviser before you choose a benefit period longer than 2 years.

*General advice only. Definitions vary between insurers and policy tiers. Confirm the exact wording against the current PDS of any insurer you are considering.*

Question 9

Can I receive partial benefits if I return to work part-time or in a reduced capacity?

Accepted Answer

**Yes. Every panel insurer pays a 'partial disability' or 'partial benefit' when you return to work at reduced capacity earning less than your pre-disability income.** The benefit is calculated proportionally to your income loss.

Partial benefits keep you supported while you rehabilitate. The exact formula and the minimum income-loss threshold vary by insurer.

## The standard formula

The industry-standard calculation across all 9 panel insurers is:

> (Pre-disability income minus current actual income) / pre-disability income, multiplied by your full monthly benefit.

## Per-insurer partial benefit references

| Insurer | PDS section | Source |
|---------|-------------|--------|
| AIA | Section 5.1 / 5.1.2, Partial Disablement definition | AIA Priority Protection PDS Version 32, 9 November 2025 |
| TAL | Section 2.6.1, Partially Unable to Work Benefit (worked example) | TAL Accelerated Protection PDS, 12 December 2024 |
| Zurich | Income Protection section, Partial disability defined | Zurich Wealth Protection PDS, 1 November 2025 |
| OnePath | Income Secure Cover, total and partial disability benefit | OnePath OneCare PDS, October 2025 |
| ClearView | Income Protection Flex, disabled-part-of-the-month rule | ClearView ClearChoice PDS, 13 May 2024 (Update 5 June 2025) |
| NEOS | Income Support Cover, partial benefit calculation | NEOS Protection PDS, 6 December 2024 |
| Encompass | Income Protection Cover, partial benefit | Encompass Protection PDS, 26 September 2025 |
| Acenda | Income Replacement Ratio formula | Acenda Insurance PDS, 27 September 2025 |
| Futura | Partial disability definition, 80% regular hours test | Futura Protection PDS, 1 October 2025 |

## A worked example

Pre-disability income: $10,000 per month. Full monthly benefit: $7,000. After returning to work part-time, you earn $4,000 per month.

- Income loss = ($10,000 - $4,000) / $10,000 = 60%.
- Partial benefit = 60% x $7,000 = **$4,200 per month**.

Combined income (employment + partial benefit) is $8,200 per month, against the original $10,000.

## Common policy variations

- **Minimum work-capacity threshold.** NEOS requires the insured to be 'working but not to their full capability for at least three consecutive months' before partial benefits begin (NEOS PDS). Other insurers do not impose this consecutive-month rule.
- **Minimum income-loss threshold.** Some policies require a 20% or 25% income drop before partial benefits engage. Check the PDS.
- **Duration cap.** Most policies pay partial benefits up to the same benefit-period cap as full benefits. A few cap the partial benefit at a shorter duration.
- **Hours test.** Futura's Income Protection Cover applies an 80% of regular work-hours test (PDS).

### Why partial benefits matter

Graduated return-to-work programmes are widely supported by treating doctors. Without partial benefits the insured would face an all-or-nothing choice: full claim with full benefit, or full return with zero support. Partial benefits allow you to rebuild work capacity while still receiving income.

Ask your treating doctor to document partial capacity and specific limitations in the medical certificate that supports your claim.

*General advice only. Confirm the formula, minimum threshold, and duration cap against the current PDS for any insurer you are considering.*

Question 10

What medical conditions and circumstances are typically excluded from Income Protection?

Accepted Answer

**Retail Income Protection policies on the panel apply a short list of standard exclusions: intentional self-injury, criminal acts, war, normal pregnancy and childbirth, and similar.** Pre-existing conditions are handled differently in retail versus direct contracts, and this distinction often surprises consumers.

Understanding which list applies to your contract type is critical before assuming any condition is or is not covered.

## Standard policy-level exclusions across the 9 panel insurers

- **Intentional self-inflicted act** or attempted suicide.
- **Participation in a criminal act**, and periods of incarceration due to participation in a criminal act.
- **War or act of war** (with terrorism usually excluded from the war definition).
- **Normal and uncomplicated pregnancy, miscarriage, or childbirth** (complications are typically covered; see the dedicated FAQ).
- **Illicit drug use** (most insurers exclude losses caused by illicit drug use).

Some insurers add narrower items such as elective cosmetic surgery (unless medically required), service in armed forces, or specific high-risk pursuits disclosed at underwriting.

## Per-insurer policy-exclusion references

| Insurer | PDS section | Source |
|---------|-------------|--------|
| AIA | Section 5.2.4 / 5.2.5 'When we will not pay' | AIA Priority Protection PDS Version 32, 9 November 2025 |
| TAL | Section 2.6.4 'When we will not pay' | TAL Accelerated Protection PDS, 12 December 2024 |
| Zurich | Income Protection 'When we will not pay' | Zurich Wealth Protection PDS, 1 November 2025 |
| OnePath | Income Secure Cover 'When we will not pay' | OnePath OneCare PDS, October 2025 |
| ClearView | Income Protection Flex exclusions | ClearView ClearChoice PDS, 13 May 2024 (Update 5 June 2025) |
| NEOS | Income Support Cover 'When we will not pay' | NEOS Protection PDS, 6 December 2024 |
| Encompass | Income Protection Cover exclusions | Encompass Protection PDS, 26 September 2025 |
| Acenda | Income Protection exclusions | Acenda Insurance PDS, 27 September 2025 |
| Futura | Income Protection Cover exclusions | Futura Protection PDS, 1 October 2025, Income Protection Cover 'When we will not pay' |

## The critical retail-vs-direct distinction on pre-existing conditions

**Retail panel IP policies do not impose a blanket pre-existing condition exclusion at the policy level.** Pre-existing conditions are handled through underwriting at application. If a condition is disclosed, the insurer may apply a personal exclusion to your policy schedule, load the premium, accept the condition with no special terms, or in rare cases decline cover for that condition.

This is different from **direct (DTC) Income Protection** contracts (often sold by banks, comparison sites, or non-broker channels). Direct policies frequently impose a blanket 12 or 24 month pre-existing condition exclusion that prevents claims for any condition you had symptoms of, treatment for, or were reasonably aware of before the policy started.

If the existing FAQ corpus has ever described retail policies as having `pre-existing condition limitations`, that wording aligns with direct contracts, not retail panel contracts. The panel cite supporting this position is that no PDS across the 9 panel insurers documents a blanket pre-existing exclusion.

### Personal exclusions on your retail policy schedule

When you apply for retail IP, the insurer underwrites your health, occupation, hobbies, and lifestyle. If something needs to be excluded, the exclusion appears on your **policy schedule** as a specific endorsement (for example, `back injuries arising from a pre-existing lumbar disc condition are excluded for 24 months`). After the specified period, the exclusion may lift; check the wording.

### Activities that are commonly excluded or loaded

- Aviation other than as a fare-paying passenger.
- Motor sports.
- Scuba diving beyond recreational limits.
- High-altitude mountaineering.
- Some occupations involving offshore work, explosives, or high-altitude rigging.

These are usually handled by personal exclusion or premium loading at application, not a blanket policy-level exclusion.

### Honesty at application

The Insurance Contracts Act 1984 and APRA's Duty to Take Reasonable Care frameworks place a positive duty on the insured to take reasonable care not to make a misrepresentation. Non-disclosure of relevant medical history can result in claim reduction or policy avoidance. When in doubt, disclose.

*General advice only. Read your policy schedule alongside the current PDS to identify any personal exclusions and confirm policy-level exclusions.*

Income Protection FAQs

Basics

What is Income Protection Insurance and how does it work?

What is a waiting period and which one should I choose?

What happens to my Income Protection insurance if I change jobs or become unemployed?

What is the difference between Income Protection and Salary Continuance insurance?

What is business expenses insurance and how does it relate to Income Protection?

What is the difference between consecutive and aggregate waiting periods?

What should I consider when comparing Income Protection policies from different insurers?

Are there alternatives to traditional Income Protection insurance?

Can I get Income Protection if I'm a contractor or have multiple income sources?

What's the difference between APRA's pre-2021 IP rules and the current rules?

Claims

What does 'unable to work' or 'totally disabled' mean in Income Protection policies?

Can I receive partial benefits if I return to work part-time or in a reduced capacity?

How do I make a claim on my Income Protection insurance?

What ongoing requirements are there while receiving Income Protection benefits?

How do Income Protection claims differ from lump sum trauma or TPD claims?

What evidence do I need to provide to prove my income when making a claim?

Can I claim Income Protection for recurring or chronic conditions?

How does Income Protection interact with workers' compensation and motor vehicle accident schemes?

What is a 'partial benefit' and how is it calculated?

Cost

Are Income Protection insurance premiums tax deductible?

How much does Income Protection insurance typically cost?

What happens to my premiums as I get older - do they increase?

How do waiting period and benefit period choices affect my premiums?

Coverage

What percentage of my income can I insure with Income Protection?

What is a benefit period and how long should it be?

What's the difference between Agreed Value and Indemnity Income Protection policies?

Can I hold Income Protection insurance inside my superannuation fund?

Can I increase my Income Protection coverage without new medical underwriting?

What is an indemnity period and how does it differ from the benefit period?

Can I have multiple Income Protection policies with different insurers?

What happens if I'm disabled while working overseas or traveling?

Does the 70% income replacement cap apply to my full salary, or is there a sliding scale at higher income levels?

Can I add a Super Contribution option to my Income Protection policy?

What is a 'Day 1' or 'no waiting period' Income Protection feature?

Are Income Protection benefits indexed to inflation?

What is a Future Insurability or Guaranteed Insurability Option?

How does Income Protection treatment of bonuses and irregular earnings work?

How does the new 'Two-Year Income Reset' affect long-duration claims?

Exclusions

What medical conditions and circumstances are typically excluded from Income Protection?

Are mental health conditions covered by Income Protection insurance?

Can I claim Income Protection for pregnancy-related complications?

Income Protection FAQs

Basics

What is Income Protection Insurance and how does it work?

What is a waiting period and which one should I choose?

What happens to my Income Protection insurance if I change jobs or become unemployed?

What is the difference between Income Protection and Salary Continuance insurance?

What is business expenses insurance and how does it relate to Income Protection?

What is the difference between consecutive and aggregate waiting periods?

What should I consider when comparing Income Protection policies from different insurers?

Are there alternatives to traditional Income Protection insurance?

Can I get Income Protection if I'm a contractor or have multiple income sources?

What's the difference between APRA's pre-2021 IP rules and the current rules?

Claims

What does 'unable to work' or 'totally disabled' mean in Income Protection policies?

Can I receive partial benefits if I return to work part-time or in a reduced capacity?

How do I make a claim on my Income Protection insurance?

What ongoing requirements are there while receiving Income Protection benefits?

How do Income Protection claims differ from lump sum trauma or TPD claims?

What evidence do I need to provide to prove my income when making a claim?

Can I claim Income Protection for recurring or chronic conditions?

How does Income Protection interact with workers' compensation and motor vehicle accident schemes?

What is a 'partial benefit' and how is it calculated?

Cost

Are Income Protection insurance premiums tax deductible?

How much does Income Protection insurance typically cost?

What happens to my premiums as I get older - do they increase?

How do waiting period and benefit period choices affect my premiums?

Coverage

What percentage of my income can I insure with Income Protection?

What is a benefit period and how long should it be?

What's the difference between Agreed Value and Indemnity Income Protection policies?

Can I hold Income Protection insurance inside my superannuation fund?

Can I increase my Income Protection coverage without new medical underwriting?