What Happens If You Can’t Work? An Income Protection Checklist

Most Australians understand the risk of losing their job. Far fewer seriously consider the risk of being unable to work.

Illness and injury remain one of the biggest – and most underestimated – financial threats facing working Australians. According to Australian insurer claims data, income protection claims are more likely than life insurance claims for people under 55, yet it’s one of the least understood forms of cover.

This is where income protection becomes critical. Not as a “nice to have”, but as a core part of financial risk management.

This checklist walks through what really happens financially when work stops, and what protections actually exist.

1. Your Income Stops Faster Than You Think

If you cannot work due to illness or injury, your income often stops immediately.

This applies to:

• Salaried employees once sick leave is exhausted

• Casual and contract workers with no paid leave

• Self-employed Australians and business owners

Income protection policies are designed to replace up to 70% of your pre-tax income, paid monthly, once a waiting period has passed. Without it, most people are forced to rely on savings or debt almost immediately.

2. Savings Rarely Last as Long as Expected

Research consistently shows many Australian households hold less than three months of accessible savings.

When income stops, expenses don’t:

• Mortgage or rent

• Utilities and groceries

• Insurance premiums

• School and childcare costs

Income protection in Australia is designed to preserve savings, not replace them. Without cover, even well-planned households often deplete emergency funds far quicker than expected.

3. Government Support Is Limited and Slow

A common assumption is that Centrelink will “step in”. In reality, government support is tightly means-tested and often insufficient to maintain normal living standards.

Depending on circumstances, options may include:

• JobSeeker Payment (if medically eligible)

• Disability Support Pension for long-term incapacity

• Short-term crisis or sickness allowances

Payments are modest, eligibility can take time to assess, and approval is not guaranteed. Income protection exists because government payments are designed as a safety net – not income replacement.

4. Debt Does Not Pause When You’re Sick or Injured

Home loans, car finance, personal loans and credit cards continue regardless of your health.

Without income protection:

• Missed repayments can damage credit ratings

• Late fees and interest compound

• Forced asset sales become more likely

Income protection benefits are often used primarily to keep debt under control during recovery, preventing long-term financial damage from a short-term health event.

5. The Impact Extends Beyond You

If others rely on your income, the financial risk multiplies.

This includes:

• Partners with shared financial commitments

• Children and dependants

• Business partners or employees

Income protection isn’t just about individual security – it protects households, families, and livelihoods when one income earner is unable to work.

6. Income Protection Through Super Is Often Inadequate

Many Australians have income protection inside their superannuation, but this cover is frequently misunderstood.

Common issues include:

• Cover amounts that haven’t kept up with income

• Definitions that don’t reflect real-world work capacity

• Waiting periods that are too long

• Cover that expires or reduces automatically

Standalone income protection policies typically offer more flexibility, clearer definitions, and better alignment with how you actually earn income.

7. Waiting Periods Matter More Than Premiums

Income protection doesn’t usually pay immediately.

Standard waiting periods range from:

• 30 days

• 60 days

• 90 days or longer

The right waiting period depends on your savings, leave entitlements, and cash flow. Choosing a cheaper policy with a long waiting period can leave you financially exposed when it matters most.

8. “Unable to Work” Has a Legal Definition

Not all income protection policies define incapacity the same way.

Key distinctions include:

• Unable to perform your own occupation

• Unable to perform any occupation

• Partial disability benefits

• Rehabilitation and return-to-work support

For professionals, tradies, business owners and specialists, these definitions can determine whether a claim is paid at all.

Income protection works best when the policy matches your actual job demands, not just your job title.

9. Claims Are Common and Often Long-Term

Australian insurer data consistently shows:

• Mental health conditions and musculoskeletal injuries are leading causes of claims

• Many claims last longer than 12 months

• A significant proportion of claimants return to work gradually

This reinforces that income protection is not only about catastrophic injury – it’s about everyday health risks that interrupt earning capacity.

Final Checklist: Are You Actually Covered?

Ask yourself:

• Do I know how much income I’d receive if I couldn’t work?

• How long would I wait before payments start?

• Would my debts still be manageable?

• Does my cover reflect how I earn income today?

If you’re unsure, that uncertainty itself is a risk.

A Practical Next Step

Income protection isn’t about pessimism. It’s about financial resilience.

A professional review can help confirm:

• Whether you’re covered adequately

• Where gaps exist

• Whether your policy still suits your life and income

At HPartners, income protection advice is part of a broader financial strategy, designed to protect not just today’s income, but your long-term plans.

Because the real question isn’t if life changes. It’s whether your finances are prepared when it does.

Any advice is general in nature only and has been prepared without considering your needs, objectives or financial situation. Before acting on it, you should consider its appropriateness for you, having regard to those factors. Before making any decision about whether to acquire a financial product, you should obtain the Product Disclosure Statement.