Misconceptions about income protection insurance explained
Last updated: February 2026
Key takeaways
- Income protection is designed to help replace income if you cannot work due to illness or injury
- It generally does not cover job loss, redundancy, or voluntary time off
- Private health insurance covers treatment costs, not lost income
- Income protection through super may be limited or end if your super becomes inactive
- Understanding waiting periods and exclusions can help avoid surprises
If your income or your partner’s income suddenly stopped, how long could your savings last? For many Aussie households, even a short break in income can put pressure on everyday essentials like rent or mortgage payments, groceries, and utility bills.
Income protection insurance is designed to help if you are unable to work due to illness or injury. It is not intended to cover every situation where income changes, which is where many common misconceptions come from.
What income protection does not cover (common misunderstandings)
Short answer: Income protection insurance is designed for a specific purpose. It helps support you financially if illness or injury stops you from working and you meet the policy terms.
Below are common situations Australians often assume are covered, but usually are not.
Job-related situations
Income protection usually does not cover loss of income due to:
- Redundancy or job loss
- Voluntary resignation
- Being dismissed for non-medical reasons
- Unpaid leave, including parental leave
These are employment-related events rather than medical ones.
Intentional acts
Most policies do not cover claims arising from intentional self-harm or attempted suicide. These exclusions are outlined in the Product Disclosure Statement (PDS).
Illegal or criminal activity
If an illness or injury occurs while engaging in illegal or criminal activities, income protection benefits are generally not payable.
Substance misuse
Some claims connected to drug or alcohol misuse may be excluded or restricted. This depends on the policy wording and individual circumstances.
Normal pregnancy and uncomplicated childbirth
Standard pregnancy, childbirth, miscarriage, and normal pregnancy-related discomforts are typically not covered under income protection insurance.
Pre-existing conditions and non-disclosure
Conditions that existed or showed symptoms before applying for cover may be excluded or subject to special terms. This is particularly relevant if they were not disclosed during the application process.
Waiting period limitations
Income protection does not usually pay straight away. A waiting period applies before benefits can begin. Short-term illnesses or injuries that resolve before the waiting period ends generally do not result in a payment.
High-risk or reckless behaviour
Injuries resulting from dangerous activities, extreme sports, exceeding legal limits such as drink driving, or participation in riots or civil unrest may not be covered unless disclosed and accepted.
Elective or cosmetic procedures
Illness or injury resulting from elective or cosmetic surgery may not be covered, depending on the policy terms.
War, riots, or civil unrest
Many income protection policies exclude illness or injury caused by war, war-like activity, or participation in riots or civil commotion.
Why these misconceptions happen
People often hear that income protection “replaces your income” and assume that means any drop in income is covered. In reality, income protection is designed for a specific situation.
Is income protection the same as life insurance?
No. These products are designed for different situations.
Life insurance generally helps provide financial support to your loved ones if you pass away or are diagnosed with a terminal illness. Income protection insurance is designed to help replace part of your income if you are unable to work due to illness or injury.
Both types of insurance can play a role in protecting your family, but in different circumstances.
Do young and healthy people need income protection?
Possibly, yes.
Being young and healthy can reduce the likelihood of illness, but it does not remove the risk entirely. Accidents and injuries can happen at any age and may prevent you from working for weeks or months. A common example is a sports injury or car accident that prevents you from working for weeks or months.
Income protection premiums are generally based on factors such as age, health, smoking status, occupation, and the options you choose for your cover.
Does private health insurance cover everything if you get sick?
No. Private health insurance can help cover certain medical and hospital treatment costs, depending on your policy. However, it does not replace your income if you are unable to work.
Income protection is designed to help cover everyday living expenses, such as bills and groceries, while you focus on recovering.
Is income protection through super fund enough?
Sometimes, but it depends on the detail.
Some superannuation funds include income protection insurance, and for some people this may be sufficient.
However, cover through super may have limitations. It may stop if your account becomes inactive or you change funds so it’s worth checking the PDS and understanding how your cover works.
Read more: Income protection insurance through super vs direct
Is income protection really necessary?
That depends on your situation, but many people might overestimate how long their savings or employer benefits would last.
It may help to consider:
- How long your savings would last if you could not work
- What sick leave or entitlements you have
- Whether your income is essential to your household
Some people rely on savings. Others choose insurance. Many use a combination of both.
Read more: Do I need income protection insurance?
What happens if you cannot work due to illness or injury?
While details vary by policy, the process usually looks like this:
- You become sick or injured and are unable to work
- A doctor confirms your condition
- Your waiting period applies
- If you are still unable to work after the waiting period and meet the policy definition, monthly benefit payments may begin
- Payments continue while you remain eligible, up to your chosen benefit period
FAQsFrequently Asked Questions
Does income protection cover redundancy?
No. Income protection is designed to cover illness or injury, not job loss or redundancy.
Can casual or self-employed workers get income protection?
Often yes, provided income can be verified and eligibility criteria are met.
Does income protection cover mental health conditions?
Mental health related claims may be covered in some circumstances. However, pre-existing mental health conditions may be excluded or subject to special terms, depending on the policy and what was disclosed when applying.
What is a waiting period?
A waiting period is the time you need to be off work before benefits can be paid. Common options include 30 or 90 days.
How long do income protection payments last?
Payments can last for a set benefit period, depending on the options chosen when you applied for cover.
Does income protection cover casual or gig-economy workers?
Often, yes. Casual, freelance, and gig-economy workers can usually apply for income protection. Eligibility and income verification may work differently, and insurers typically assess consistent, verifiable income. A common misconception is that you must be full-time to qualify.
Can income protection cover you if you have multiple part-time jobs?
Yes, in many cases. Insurers usually assess total verifiable income across multiple roles, not just one main job. The misconception comes from assuming only a single employer counts.
Final word
Income protection insurance may help support you financially if illness or injury stops you from working. It is important to understand what it does and does not cover. Knowing the limits, waiting periods, and exclusions upfront can help you choose cover with confidence and peace of mind. Request a quick quote now to find out more.
23 Feb 2026