Benefit Period

The benefit period is the maximum length of time an insurer will continue paying income protection benefits for a single claim. It represents the insurer's maximum payment obligation per claim, set when you buy the policy and disclosed in the PDS.

Common benefit period options

Australian income protection policies typically offer these structures:

• 1 to 2 years: short-term, covers temporary disabilities only.
• 5 years: middle ground for medium-term disability cover.
• To age 65 or 70: long-term, bridges the gap until Age Pension eligibility.

Short vs long benefit period

| Feature | 2-year benefit period | To age 65 benefit period | |---|---|---| | Premium cost | Significantly lower | Significantly higher | | Protection scope | Temporary disabilities only | Permanent and long-term disabilities | | Total payout (illustrative) | Capped at 24 months | Potentially decades of income | | Best paired with | Strong TPD lump sum | Standalone or with TPD |

Income protection claims that extend beyond 90 days have an average duration of 2 to 3 years, and catastrophic disabilities can be permanent, which is why longer benefit periods are widely used for primary income protection.

How payments start and stop

• Starts: after the waiting/elimination period expires and you meet the policy's disability definition.
• Continues: while you remain on claim under that definition.
• Stops: when you no longer meet the definition, when you reach the maximum benefit period, or when the policy's age limit is reached.

Step-down benefits

Some policies use a 'step-down' structure where the monthly payment reduces after a defined period. For example: 100 percent of the benefit amount for 2 years, then 75 percent through to age 65. These structures lower the premium versus a flat benefit period.

Matching benefit period to your income-earning horizon is the central decision in income protection design.