Life Insurance with Income Protection: A Comprehensive Guide

When it comes to securing the future of your family and protecting your income, both life insurance and income protection play critical roles. While each offers unique coverage, combining both types of insurance provides a comprehensive safety net for you and your loved ones.

In this article, we’ll explore the differences between life insurance with income protection, answer frequently asked questions, and explain why having both as part of your financial plan is vital. Lastly, we’ll give you tips on creating a tailored risk insurance solution that combines these coverages, giving you peace of mind in the face of life’s uncertainties.

What is the Difference Between Life Insurance and Income Protection?

Life insurance and income protection serve different purposes but are both designed to help you manage financial risks. Life insurance pays a lump sum to your beneficiaries in the event of your death, while income protection pays a monthly benefit if you’re unable to work due to injury or illness.

Comparison of Life Insurance and Income Protection

AspectLife InsuranceIncome Protection
PurposeProvides financial support to dependents in case of death or terminal illnessReplaces income if you’re unable to work due to illness or injury
Benefit TypeLump sum payoutMonthly benefit (typically anywhere between 60% – 75% of income)
When it PaysDeath or terminal illness diagnosisInability to work due to injury or illness
Maximum BenefitVaries depending on the policy Up to 75% of your income, with benefit caps depending on policy
EligibilityAustralian residents (aged 18–65)Australian residents (aged 18–60)
Payment PeriodOne-time lump sumMonthly payments depending on the benefit period. The most common options are 2 years, 5 years or until age 65. 
Waiting PeriodNone; paid upon death or diagnosisWaiting period options of 30, 60, or 90 days before payments begin

Both types of insurance cover different scenarios but can work together to provide holistic financial security.

Do I Need Both Life Insurance and Income Protection?

This will depend on your personal circumstances however, having both life insurance and income protection is often recommended to ensure that you’re fully covered for different life events.

Life insurance ensures that your family will be financially supported if the worst happens to you, while income protection ensures that you are protected if you’re unable to work temporarily due to illness or injury. By having both, you can ensure that you and your family are protected from the two biggest financial risks — death and loss of income.

Does Life Insurance Cover Income Protection?

No, life insurance and income protection are separate policies. Life insurance pays out a lump sum in the event of your death or terminal illness, whereas income protection provides ongoing payments if you’re unable to work due to illness or injury.

You can, however, hold both policies simultaneously to ensure you’re covered for both scenarios.

What Income Protection Does Not Cover in Australia?

Income protection generally covers you if you’re unable to work due to injury or illness, but there are a few exclusions. These often include:

  • Pre-existing conditions: Some insurers may exclude conditions that existed before taking out the policy.
  • Intentional self-injury: Claims arising from intentional harm are typically excluded.
  • Dangerous activities or occupations: Certain high-risk activities or jobs may not be covered, or you may need additional coverage for these.
  • Part-time work or insufficient hours: If you work fewer than 20 hours per week, you may not qualify for income protection insurance.

Always review your Product Disclosure Statement (PDS) to understand the specific exclusions and conditions for your policy.

Is Income Protection Insurance Paid on Death?

No, income protection insurance is not paid on death. It is designed to replace a portion of your income if you’re unable to work due to illness or injury. There are some Income Protection Insurance policies that may have a built-in death benefit which means the insurer will pay a multiple of the Income Protection monthly benefit in the event of death. Life insurance is the policy that pays a benefit on death, ensuring that your family is financially secure when you’re no longer around.

Creating a Comprehensive Risk Insurance Solution

A smart approach to managing your financial risk is to combine life insurance and income protection into a single, comprehensive solution. Here’s why this makes sense:

Why a Combined Approach Works:

  1. Holistic Coverage: Life insurance protects your family from the financial burden of your death, while income protection ensures that you are covered if an illness or injury prevents you from earning an income.
  2. Peace of Mind: With both in place, you can focus on recovery during difficult times, knowing that both immediate and future financial needs are taken care of.
  3. Customised Plans: At Safety Nest, we can help tailor a solution that considers your unique financial situation, including the type of work you do, your income, and your family’s needs.
  4. Flexible Options: Depending on your life stage, you can adjust your policies to ensure you’re adequately covered, whether you are single, married, or have dependents.

By holding both life insurance and income protection, you are safeguarding your current lifestyle and your family’s future. Life insurance ensures that your loved ones are taken care of after you’re gone, while income protection helps maintain your financial stability if you’re unable to work for an extended period.

Get Expert Guidance with Safety Nest

Now that you understand the importance of life insurance and income protection, it’s time to create a tailored plan that fits your needs. At Safety Nest, we specialise in providing comprehensive risk insurance solutions that ensure you and your family are protected no matter what life throws your way.

Click the button below to get started and speak with a Safety Nest adviser. We’ll work with you to craft the perfect insurance plan that gives you the peace of mind you deserve.

Secure Your Family's Financial Future

Talk to our expert advisors about your insurance options. We offer flexible times, so book your no obligation online consultation today and start planning for tomorrow.

Vector 14
Vector 17
Vector 15
Vector 18

Related Blog

Stay informed with our latest blog posts.

blob.d48bc434.webp 1