Income Protection Insurance vs Mortgage Protection
Income Protection Insurance vs Mortgage Protection
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Long story short
Income protection insurance covers a range of expenses
Income protection may be used to cover your living expenses, including bills and mortgage repayments, if you’re unable to work due to illness or injury, with benefits up to 70% of your income.
Mortgage protection insurance is limited to your loan repayments
Mortgage protection specifically covers your home loan repayments in the event of illness, injury, redundancy or death. Premiums are based on your mortgage size, not income.
Depending on your policy, you might be eligible for tax benefits
Income protection premiums are typically tax-deductible, unlike mortgage protection premiums, which generally aren’t.
What is the difference between income protection and mortgage protection?
It can be easy to confuse income protection with mortgage protection, but it turns out they’re two very different insurance products. The key difference is that mortgage protection will only cover your mortgage repayments, whereas income protection can be used to cover a variety of living expenses, including your mortgage.
What is income protection?
Income protection insurance can help cover your living costs if you experience serious illness or injury that prevents you from being able to work.
So, how exactly does it work? Put simply, you pay an ongoing premium based on your income and personal circumstances. If you’re unable to work due to illness or injury, you’ll be entitled to a regular payment that you can use to cover your expenses, including bills, mortgage repayments, education and even rehabilitation costs.
When it comes to comparing income protection policies, you’ll find there are several different options to choose from, including:
- Choosing a level of cover: The different levels of cover available can meet up to 70% of your income.
- Selecting a waiting period: Waiting periods usually range from 14 days to two years with a shorter waiting period generally attracting a higher premium.
- Having the freedom to select your own benefit period: Benefit periods refer to the amount of time you’ll receive your income protection payments. They typically last from two to five years, although some policies have an age cut off (usually 65).
- Choosing between ‘standard’ and ‘plus’ contracts: Standard contracts tend to have fewer bells and whistles, but, depending on your circumstances, they can still provide the cover you need.
- Deciding between a ‘variable aged stepped’ or ‘variable’ premiums: This determines how much your premiums are now and in the future. While variable aged stepped policies generally start off cheaper and increase with age, variable premiums usually charge a higher policy from the get-go and increase slowly with time. So, although variable aged stepped policies might seem more affordable to begin with, variable premiums can often be more cost effective if you plan on holding onto your policy over the long run.
What is mortgage protection?
Mortgage protection insurance, or home loan insurance, is a type of life insurance that’s designed to cover your mortgage in the event you’re unable to work. This could be due to several reasons, including illness, injury, redundancy or death.
Unlike income protection, which is calculated based on your income, mortgage protection is calculated based on the size of your home loan.
While income protection can be used to cover your mortgage repayment if you choose, mortgage protection is specifically intended to cover your repayments for a set amount of time.
Helpful tip:

The real benefit of income protection over mortgage protection is flexibility. In the event you are unable to work, mortgage protection can only be used to cover your home loan repayments whereas income protection payments can be used to cover any living expense, including your mortgage.
Eliza Ryan
Senior Marketing and Growth Channels Manager, Lifebroker
What cost factors influence premiums?
Despite their differences, there are several different factors that impact the premiums for both income protection and mortgage protection. Here are some of the key cost factors that can influence the cost of these policies:
- Age: Age is often used to determine your work-life expectancy and your health risk.
- Occupation: People with high-risk occupations often face higher premiums because their job involves a greater chance of injury.
- Coverage amount: You can often select the amount of coverage you’d like, with higher coverage attracting higher premiums.
- Health and medical history: Pre-existing conditions or a history of health issues can result in higher premiums due to the increased likelihood of claims. Similarly, smokers also face higher premiums due to the health risks that come with smoking.
- Benefit period: Higher benefit amounts (e.g. the amount of income or mortgage covered) typically result in higher premiums.
- Coverage scope: Both income protection and mortgage protection policies with broader scope tend to offer more inclusions, which usually comes with a higher premium. When it comes to mortgage protection insurance, the coverage is usually determined by the size of your loan and your remaining term.
Key differences between income protection and mortgage protection
Both mortgage protection and income protection are tailored to different purposes. Generally speaking, income protection is useful when it comes to covering a variety of living expenses, including bills, mortgage repayments and rehabilitation costs. With this in mind, it’s often suitable for people with a range of expenses to cover. On the other hand, mortgage protection is designed specifically to cover your home loan.
Mortgage protection | Income protection | |
Purpose | Covers mortgage repayments in case of illness, injury or death. | Replaces lost income because of not being able to work due to illness or injury. |
Flexibility | Typically less flexible as it’s designed to cover mortgage repayments | Payment can be used for anything so there is more flexibility to cover a range of costs, like rehabilitation or medical bills |
Suitability | Suitable for homeowners who need mortgage repayment cover. | Suitable for anyone relying on income who needs financial support if unable to work. |
Exclusions | Depends on the policy, but often excludes pre-existing medical conditions. | Depends on the policy, but usually excludes self-inflicted injuries, attempted suicide and criminal activity. |
Tax implications | Premiums are generally not tax-deductible. | Premiums are generally tax deductible depending on how they’re paid. |
Where can I find and compare policies?
If you’re after cover for your mortgage and a variety of other expenses, iSelect is here to help you compare income protection policies. We’ve partnered up with the team at Lifebroker to bring you a range of insurance options from some of Australia’s leading providers.

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iSelect’s partnered with Lifebroker (AFS Licence number: 400209) to help you compare a range of Life Insurance policies. iSelect earns a commission from Lifebroker for each customer referred through the website or contact centre. Lifebroker do not compare all life insurers or policies in the market.
iSelect Life Pty Ltd – ABN 89 124 304 347, AFS Licence Number 331128. Any advice provided by iSelect is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice iSelect gives you, having regard to your personal situation, before acting on iSelect’s advice or purchasing any policies. You should consider iSelect’s Financial Services Guide which provides information about iSelect services and your rights as a client of iSelect.’