You are here

Save your salary!

Save your salary!

We spend our working lives trying to grow wealth and assets, so it makes sense we would want to protect them. We insure our homes and cars, our boats, our home contents and even our pets, yet surprisingly most Australians fail to insure the very thing that pays for everything they own – their ability to earn an income. Why?

No safety net

It’s fair to say that income protection insurance is not very popular with Aussies and underinsurance is common. According to Rice Warner's under insurance research, the median level of income protection cover across the nation's working population is just 16%.

Limited savings

And there seems to be a sense of, ‘she’ll be right’ when it comes to planning for financial security. Figures show the average Australian has less than 6 weeks of funds available and for many, much less.

According to ME Bank's December 2014 Household Financial Comfort Report, 29% of households reported that they had ‘cash savings’ of $1000 or less and 56% reported that they had ‘cash savings’ of $10,000 or less. That’s 85% of us who couldn’t survive more than two months without an income.

Growing debt

But perhaps most concerning, is how much money the average Australian would need to have coming in just to cover their household debt. A Bankwest Curtin Economics Centre study, reported by the ABC, showed that Australian households are holding three times as much debt on average than they did 25 years ago.

Average mortgage debt as a proportion of property values has almost tripled over the past 25 years, rising from 10 to 28 per cent since 1990. In 1990, average household debt represented less than six months of annual income. That’s now tripled to 18 months of annual income

Adding up the costs

So when considering if income protection makes sense for you, it’s a good idea to consider how you would pay all your living costs if you were forced to stop working through injury or illness. How would the mortgage get paid? What about the medical expenses, school fees and everyday expenses?

And when thinking about all of that, consider that the average weekly income for working Australians is $1,322 and the average weekly Centrelink Disability Support Pension is currently less than $3501.

Do the research

If you're still unsure about whether income protection is an insurance you need, check out this article on consumer advocacy site Choice, which looks at the different types of premiums, costs, cover, the tax implications (it's tax deductible) and more.


More information

1. Read Rice Warner's summary of their Underinsurance Research Report.

2. Read the ABC article on the Bankwest Curtin Economics Centre study on Australian household debt.

3. Find out more about Income Protection at Choice.

4. NRMA Insurance has Income Protection Insurace.


1Disability support pension based on $689 per fortnight, single, basic rates as at 25/10/11. And average income figure is the earnings for a full time adult on ordinary time. Figures from Centrelink.

Disclaimer: This is not financial or professional advice. We recommend you obtain independent advice before making any financial decisions. NRMA Income Protection (ex Involuntary Unemployment Cover which is issued by ACE Insurance Limited) is issued by TAL Life Limited ABN 70 050 109 450 AFSL 237848 and promoted by IAL Life Pty Limited ABN 15 137 509 936, Authorised Representative No. 427847 of TAL Direct Pty Limited 39 084 666 017 AFSL 243260 (which is a related entity of TAL Life Limited). This is general advice only so to see if the product is right for you, always consider your own circumstances and the Product Disclosure Statement and Financial Services Guide available at