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What is income protection?

What is mortgage protection?

What does income protection cover?

What does mortgage protection cover?

What’s the difference between income protection and mortgage protection insurance?

What cost factors influence income protection and mortgage protection premiums?

Where can I find and compare policies?

Long story short

Income protection insurance can cover a range of expenses

Income protection could be used to cover all sorts of living costs, including bills and mortgage repayments, if you’re unable to work due to illness or injury.

Mortgage protection tends to be for home loan repayments

Mortgage protection specifically covers your home loan repayments in the event of illness, injury, redundancy or death.

Income protection offers more flexibility

As income protection’s benefits can be used more widely, it might offer more value depending on your circumstances.

What is income protection?

Income protection insurance is a type of life insurance that pays a regular monthly benefit of up to 70% of your regular pre-tax (gross) income if you’re temporarily unable to work because of an illness or injury. These funds can then be used to cover regular household expenses, including mortgage repayments, as well as treatment and rehabilitation costs.

You can typically customise your income protection insurance policy by choosing your benefit amount or level of cover, waiting period and benefit period. The waiting period is how long you’ll need to wait before you can start claiming – usually somewhere between a month and 2 years – while the benefit period is how long you’ll receive monthly payments for. Benefit periods can range from a few years to up until you turn 65.

Importantly, unlike workers’ compensation, you don’t need to have been injured at work to claim income protection. Any eligible injury or illness that prevents you from doing your regular duties is usually enough.

What is mortgage protection?

Mortgage protection insurance, or home loan insurance, is a type of life insurance that helps cover your mortgage repayments if you’re unable to work because of an illness or injury, lose your job, are diagnosed with a terminal illness or pass away. Mortgage insurance is typically paid out as regular payments to help meet your home loan repayments, but it can sometimes be paid out in a lump sum, such as if you pass away.

Your cover level can depend on the situations you’d like covered by your mortgage protection insurance. For instance, if you’re only covered for being temporarily unable to work, you could get loan repayment benefits of up to $10,000 each month for a set benefit period, like 18 months. However, if your ability to earn an income and independently pay off your mortgage is affected (such as if you pass away), your benefit amount could be as much as $800,000 or even $1 million to more effectively cover the bulk of your mortgage payments. Loan repayments benefits may be available up to a set monthly amount – refer to the relevant PDS for specific limits.

Mortgage protection insurance is different to lenders mortgage insurance, as it’s to help you make mortgage repayments rather than to protect the bank if you can’t make your repayments.

What’s the difference between income protection and mortgage protection insurance?

Income protection and mortgage protection are both kinds of insurance products that could help you keep up with mortgage repayments if you’re temporarily unable to work because of an illness or injury, but they also have noticeable differences, including when benefits can be claimed, what payouts can be used for and who might find them useful.

Here are some other differences between the two types of life insurance.

Helpful tip

Income protection and mortgage protection aren’t the only life insurance policy options on the table, even if you’re specifically worried about something stopping you from paying off your mortgage.

For instance, term life insurance or death cover pays a lump sum amount to your nominated beneficiaries if you pass away. This money can go towards paying off any medical or funeral expenses, as well as helping your loved ones maintain their lifestyle, including paying off the mortgage.

Getting familiar with the different types of life insurance cover out there could help you find an option that gives you peace of mind about the future.

Adrian Bennett

General Manager for General Insurance

What cost factors influence income protection and mortgage protection premiums?

Income protection and mortgage protection premiums can be affected by your unique situation, like age and cover amount, and policy choices, like benefit and waiting periods.

Both income protection and mortgage protection premiums take a range of factors into account, including:

• your age: generally, premiums increase as you age
• your level of cover: a higher amount of cover tends to come with a higher premium
• your benefit period: a longer benefit period can increase your premiums
• your waiting period: a shorter waiting period can increase your premiums.

Income protection premiums can also be affected by:

• your health, medical history and pre-existing conditions: a history of health issues can mean higher premiums and/or exclusions
• your occupation: a high-risk job can mean higher premiums

Where can I find and compare policies?

While both mortgage protection insurance and income protection insurance can help protect your home loan, income protection insurance may offer broader coverage for a range of expenses, rather than just mortgage repayments. Which is more suitable will depend on your individual circumstances.

If you’re keen to see what income protection could look like for you, iSelect has partnered with Lifebroker to make comparing income protection policies from a range of providers easier – just use our handy online comparison tool.