Selecting either income protection insurance or mortgage protection

Published on December 1st, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Mortgage protection is very different from income protection, in that it covers no more than the mortgage repayment. Income protection, on the other hand, can cover the mortgage repayments as well as other bills. These could include school fees, utility bills, and even rehabilitation costs. Either way, both come in handy should you, for example, be diagnosed with a serious illness such as cancer. In fact, the Cancer Council Australia has declared that there were 134 000 new cases of cancer in 2017. That number is projected to reach 150 000 by 2020. However, before simply choosing between income protection or mortgage protection, you should examine the differences and similarities between the two.

The similarities

Both income protection and mortgage protection offer death and disability benefits. In addition, both have the option for either level or stepped premiums. With the latter, the premiums start off low, increasing as you age. By contrast, a level premium will remain static throughout the policy period.

The differences

In terms of differences, mortgage protection and income protection differ on benefit payment, flexibility options, basis for claims, and the application process.

Insurance cover

Mortgage protection provides a one-off or ongoing payment to cover the mortgage repayments you. There is also LMI (lenders mortgage insurance) this cover is compulsory for people buying a home with less than 20% deposit and it there to cover the lender, not you. Income protection provides up to 75% of your income which can be used to cover mortgage payments on top of other expenses.

Tax benefits

With mortgage protection there are no tax benefits; however, with income protection, the premiums are tax deductible.

Pre-existing conditions

Mortgage protection excludes all pre-existing conditions; however, with income protection, even though the conditions may be disclosed, they are not excluded.


Mortgage protection has less flexibility compared with income protection, which allows the option for different levels of cover.

The application process

Mortgage protection does not require any blood test results or other medical test results to accompany the application. Income protection is different, lifestyle factors such as age, smoking status, pre-existing conditions, will affect the type of cover offered and the costs of the cover.

Ancillary benefits

Income-protection policies generally offer various ancillary benefits whereas mortgage protection normally offers no such benefits.

Both have their pro’s and con’s. Price is a factor for most people. If there is no income or life protection policies in place and there is no plan in the future for this insurance to be purchased, then mortgage protection can be a great, affordable option to have to cover what usually is the households biggest financial commitment.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.

Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.

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