By Paul Feeney, Founder and Chief Executive Officer, Otivo
People insure their cars, their homes and their phones, and then overlook the asset that pays for all of them, their income. Income protection covers the risk that illness or injury stops you earning for a while, which for most working people is a bigger financial threat than it first appears. Whether you need it comes down to how you'd cope without a pay cheque. Here's how to weigh it.
Quick answer
Income protection insurance replaces part of your income, typically up to around 70%, if you can't work for a period due to illness or injury. Whether you need it depends on how long you could cover your expenses without your income. As at July 2026, it tends to matter most for those who rely on their earnings and have limited savings to fall back on.
What does income protection cover?
Income protection pays you a regular benefit, commonly up to around 70% of your income, if illness or injury stops you working for a time. Rather than a lump sum, it typically provides a monthly payment while you're unable to earn, helping you keep meeting your living costs during recovery. Policies have a waiting period before payments begin and a benefit period over which they'll be paid, both of which vary, and both of which shape how much protection the cover actually provides.
Who tends to need it?
The clearest case is anyone who relies on their income to meet their commitments and doesn't have a large buffer to fall back on. A worker with a mortgage, a family to support and a few weeks of savings would face real pressure if their income stopped for months. The more your lifestyle and obligations depend on a continuing pay cheque, and the thinner your safety net, the more income protection tends to matter.
Who might need it less?
Those with a substantial financial cushion or other income to fall back on have a weaker case. Someone with significant savings, a partner whose income could cover the household, or few financial commitments could potentially absorb a period without earnings on their own. In that situation the need for income protection is lower, since the risk it covers, a temporary loss of income, is one they could self-fund without hardship.
How does it differ from TPD and sick leave?
It fills a specific gap the others don't. Employer sick leave usually covers only a short period, often not enough for a lengthy illness or injury. TPD cover pays a lump sum, but only if your inability to work is permanent. Income protection sits between them, covering a temporary but extended inability to work that outlasts your sick leave but isn't permanent. That middle ground is exactly the situation many working people are most exposed to.
Do you have it through super?
Sometimes. Some super funds include income protection as part of their default cover or offer it as an option, though it isn't as universally provided as life and TPD cover. Where it is included, the terms, waiting periods and benefit periods can be limited, so they're worth checking against what you'd need. Knowing whether you already hold some through super is the starting point for deciding whether it's enough.
Frequently asked questions
How much does income protection pay?
Typically up to around 70% of your income, paid as a regular benefit while you're unable to work, subject to your policy's terms. Waiting periods and benefit periods vary and affect when and for how long you're paid.
Do I need income protection if I have sick leave?
Sick leave is usually limited to a short period, so it may not cover a lengthy illness or injury. Income protection is designed for longer absences that outlast your sick leave, which is where the bigger financial risk lies.
Is income protection available through super?
Sometimes. Some funds include it as default or optional cover, though not as commonly as life and TPD cover, and the terms can be limited. It's worth checking your fund to see what, if anything, you already hold.
Where to from here
Your income is the engine everything else runs on, which makes it worth protecting. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a personal insurance inside super module that helps you understand how much personal insurance you might need, based on your income, dependants, debts, age and existing cover. It helps you weigh whether income protection fits your situation.
Sources
- ASIC MoneySmart — income protection insurance. moneysmart.gov.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.