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

Both types of insurance provide financial protection but in different ways. Understanding some key details, can help you assess both types of insurances against your specific needs, to help you protect yourself and your loved ones.

Insurance is one way to help protect yourself and your family from financial hardship if you’re unable to work due to an illness or injury or, if you’re no longer around to look after your loved ones.

Understanding which type of insurance best suits your needs is the first step in making sure you and your family have the right cover.

Let’s compare life insurance and income protection

Income protection pays a percentage of your income on a monthly basis if you’re unable to work due to an illness or injury. Medibank Income Protection will cover you for up to 70% of your pre-tax income, (up to $12,500 per month, depending on your age) for a specified benefit period.1

Life insurance pays a lump sum amount to your beneficiaries or estate if you pass away or are diagnosed with a terminal illness2 and not expected to live for more than 12-months. Medibank Life Insurance will cover you for up to a maximum of $2.5m (depending on your age and income). You can also add other types of cover to your life insurance, such as Total and Permanent Disability (TPD) Cover,3 Critical Illness Cover,4 and Child Cover5  - which can all help to provide financial assistance for things such as medical expenses or accessibility modifications to your home if you get certain illnesses or become disabled.1

How long does income protection insurance pay out for?

Subject to the maximum benefit period, most income protection policies pay the monthly benefit whilst you remain ill or injured.

Benefit periods of 2 years or 5 years are available under Medibank Income Protection.

How long does life insurance pay out for?

Life insurance, including Life Cover, TPD Cover, Critical Illness Cover and Child Cover is paid out as a once off lump sum.

So, do you need life insurance and/or income protection insurance?

There are a number of factors to consider that can help you decide whether you should explore life insurance or income protection insurance – or both.

For example, if you couldn’t work due to injury or illness, how would you pay the bills month to month? How long would your savings or sick leave last?

Income protection insurance may also be particularly important if your family relies heavily on your income, or if you have debt – like a mortgage – that you’d need to keep repaying while you’re unable to work. Or, if you don’t have access to any sick or annual leave, because you’re self-employed.

Life insurance can be particularly important to consider when some of life’s major milestones occur, things like starting or growing your family or buying a new home – those life changes that mean your loved ones’ wellbeing would be significantly and directly impacted if something happened to you.  

For advice appropriate to your personal circumstances, speak to a financial adviser.

Ready to get or talk about either type of insurance? Have a look at the Medibank Life Insurance PDS or the Medibank Income Protect PDS.  You can also get a quick quote online for life insurance or income protection insurance, or call the Medibank team on 1300 152 271 if you’d like to talk to us.

 

Things you should know

1 Eligibility criteria apply. Refer to the PDS.

2 For the definition of terminal illness, please refer to the PDS.

3 For details on the optional TPD Cover, including definitions and eligibility criteria, please refer to the PDS.

4 For details on the optional Critical Illness Cover, including definitions, qualifying periods, and eligibility criteria, please refer to the PDS.

5 For details on the optional Child Cover, including definitions, qualifying periods, and eligibility criteria, please refer to the PDS.

Life Insurance

Medibank Life Insurance and Medibank Income Protection (collectively Medibank life insurance) are issued by the insurer, Zurich Australia Limited ABN 92 000 010 195 AFSL 232510 (Zurich). NEOS Direct, a registered business name of NDLI Pty Ltd ABN 70 665 747 277 AFSL 547119, distributes and services Medibank life insurance, which is promoted by NEOS Direct's authorised representative Medibank Private Limited ABN 47 080 890 259 (AR No. 286089) (Medibank).  

Any advice provided is general only and doesn’t consider your objectives, financial situation or needs. You should consider these factors, the appropriateness of the advice, and carefully read the relevant Product Disclosure Statement (which sets out the product terms, conditions and exclusions), Target Market Determination and Financial Services Guide before making a decision to acquire, or continue to hold, the product.

Your personal information will be handled in accordance with the Privacy Policies of the parties involved. Click here for NEOS Direct's Privacy Policy, Medibank Private's Privacy Policy or Zurich's Privacy Policy.