The amount has no standard answer — two variables set it
When readers ask how much income protection they need, they are usually hoping for a single figure. There isn't one, and no source in this article supplies one. What can be set is the structure: a replacement ratio (what share of your earnings the policy is built to replace) and a waiting period (how long you fund yourself before a benefit can start). Those two variables interact, and they are read together with a benefit period, which caps how long payments can run. Everything below is mechanism and method, so you can check a specific Product Disclosure Statement (PDS) and a specific quote against your own finances.
Replacement ratio, part one: APRA's supervisory expectations
APRA's letter to life insurers of 30 September 2020, Final individual disability income insurance sustainability measures, sets expectations for new individual disability income policies issued from 1 October 2021. Product Measure 2 expects benefits under such a new policy to be no more than 90% of earnings at claim time for the first six months and 70% thereafter, taking all benefits under that product into account.
Product Measure 1 is the companion piece: stable income should reflect earnings at the claim event no older than 12 months, while variable income should use an appropriate average reflecting lost future earnings. That is why the ratio is expressed as a percentage of relevant earnings rather than a fixed dollar sum.
Three cautions follow. These are supervisory product expectations, not a promise that any insurer offers either percentage. They are ceilings, not entitlements. And they apply to the policy classes and dates described in that letter — they are not a description of every policy already on foot.
Replacement ratio, part two: what one policy's PDS actually does
AIA Australia's AIA Priority Protection Product Disclosure Statement & Policy Document, version 33, prepared 31 August 2026, gives a concrete counter-example. Its Income Protection CORE cover generally caps the insured monthly benefit at the lesser of the chosen sum insured and 70% of monthly pre-disablement income initially. Its 70%-to-60% option falls to 60% after 24 months; the flat-70% and five-year options have different later treatment. Above its first monthly income band, AIA tapers the percentage, so 70% must not be applied to every dollar at higher incomes (sections 5.1.1 and 5.1.3, and the definitions; checked at printed pages 90, 94, 97 and 187–188).
The same policy's consumer summary lists claim offsets that can reduce a benefit — business profits, other income protection policies, and certain compensation — while expressly excluding sick pay and annual or long-service leave from its listed employer-payment offset. That is one insurer's treatment, not a rule for the market.
Why no single industry-wide percentage can be quoted
Put the two sections side by side and the reason is clear. APRA's 90% and 70% are regulatory expectations about the design of new contracts. AIA's 70%, its 60% after 24 months, and its tiered rates are contractual terms in one PDS. They operate at different levels, they use different income bases, and one is a ceiling on product design while the other is a cap on a benefit. Quoting "income protection pays 70%" as a universal fact would misstate both.
The practical consequence: the ratio you use in your own planning must come from the PDS in front of you, including its tiering and its offsets, not from a headline figure.
Waiting period: the second lever, and it cuts against you
TAL describes the waiting period as the delay before a benefit starts accruing, with a benefit usually not paid for the days within it. A longer waiting period generally brings lower premiums, because fewer early days are insured, and TAL's framing asks how long a person can afford to wait. The actual price difference needs a quote.
That is the trade-off in one line: a longer wait lowers cost but lengthens the gap you must fund yourself. So waiting period and cover amount cannot be chosen independently. A larger monthly amount does not help during a wait you cannot bridge, and a short wait costs more for the same amount.
AIA CORE lists waiting-period choices of 30, 60 or 90 days, or two years, subject to occupational eligibility. The chosen waiting period is a policy term; payments may arrive after it ends, so do not treat its end date as cash arriving that day.
For the bridging question, TAL notes that a self-employed person generally cannot rely on employer sick leave. For an employee, available sick leave or annual leave, savings and other household income can be tested against expenses during the chosen wait — but these are budget inputs you supply, not guaranteed entitlements and not insurer offsets. Separately, workers compensation is compulsory and differs by state and territory; anything touching that scheme, its obligations or its time limits is governed by the law of your state or territory, and it is distinct from an individual policy.
Benefit period: the ceiling, not a recovery forecast
AIA CORE lists benefit periods of two years, five years, or to age 65, with occupational restrictions and policy-anniversary qualifications. Payments also require continuing satisfaction of the policy's disability terms and may stop earlier.
A useful self-check is to compare the financial consequence of income stopping at two years against a longer inability to work, then look at which benefit-period options are actually offered to you. No source here predicts your recovery window or says a to-age-65 option is necessary for everyone. One more distinction worth keeping: APRA's expectation that new policy contracts have terms of no more than five years with a renewal mechanism is separate from a benefit period that may run to a stated age. A to-age-65 benefit period does not fix all policy terms until that age.
A two-step estimate you can run yourself
Step one: income to ratio. Relevant annual pre-tax earned income ÷ 12 × the policy's replacement percentage gives an indicative monthly amount; equivalently, relevant monthly income × percentage. This arithmetic follows from AIA's monthly pre-disablement-income percentage and APRA's earnings-based ratio. It is a planning calculation, not an insurer quote and not a claims determination.
Step two: check it against the policy's own cap. For AIA CORE, the insured monthly benefit is capped by the lesser of the selected sum insured and the policy's income-based amount, with tiered rates at higher monthly earnings, possible offsets, and conditions attached. Its pre-disablement income for an actively employed claimant generally averages the 12 consecutive months before disablement, with specified exceptions (section 5.1.4).
Before step one, it helps to start from the household's essential monthly expenses and existing support, then test the resulting figure against the policy's maximum and definitions. That ordering does not select a sum insured for you.
Self-employed readers: earnings are not turnover
For AIA Income Protection CORE, self-employed income is business or practice income attributable to your personal work minus your share of necessary business expenses. Voluntary super contributions are included; passive dividends, interest, rent, asset-sale proceeds and royalties are excluded (definition of Income, printed page 187). Gross business receipts are not the insured income.
AIA may use payslips, employer information, bank statements and a lodged tax return to determine income, and may require completion of an annual tax assessment. For an actively employed claimant it generally averages monthly income across the 12 months before disablement. That is AIA's stated evidence and method, not a universal checklist for every insurer. APRA's point about variable income using an appropriate average period for the occupation explains why fluctuating self-employed earnings need a policy-specific lookback. No ATO material is used here, so nothing in this article addresses tax treatment or after-tax amounts.
What drives the cost per month, and how to get a real figure
AIA states that premiums depend on the chosen monthly benefit, the waiting and benefit periods, occupation, and income. Its Income Protection (CORE) product page links to its own public "Get quote" entry, where a reader supplies their own occupation, income and cover selections to review a resulting insurer quote, if the interactive application loads for them. No price, price range, or completed calculator result was verified for this article, and that quote tool is an insurer-operated entry point rather than a neutral market-wide comparison.
The sensible order of operations follows from that list: settle the amount and ratio first, then the waiting period you can bridge, then the benefit period you are comparing, then take your own occupation and income into an official quote tool and read the number it returns. Comparing two structures at a time keeps the driver of any difference visible.
What to check in your own policy document
Check the earnings definition and its lookback, whether the percentage is flat or tiered by income band, what the later-period percentage becomes, the waiting-period choices available for your occupation and when payments can begin, the benefit-period options and the conditions that stop payments, and the offset list. Two policies with the same headline percentage can produce different monthly amounts once tiering, offsets and definitions are applied.
This article is general information from Income Protection Help, an education service. It doesn’t take your individual objectives, finances or needs into account. Income Protection Help isn’t an insurer or underwriter, and doesn’t promise any particular premium, level of cover, underwriting decision or claims outcome. Any product terms discussed are indicative; the final word is always in the provider’s PDS and policy schedule. If you send a general enquiry, we aim to respond within one business day.
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