Most income protection policies are set up once and never meaningfully reviewed. The policy is purchased early in a career, the premium is affordable, the cover amount feels adequate, and the whole thing goes into the bottom drawer.
Five years later, income has doubled. The policy has not.
This is the most common insurance gap we see with high-income professionals. Not a missing policy. Not a declined claim. A policy that was right when it was written and is now structurally inadequate for the income it is supposed to protect.
The Numbers Behind the Gap
Income protection typically covers up to 70 to 75 per cent of pre-claim income, subject to insurer and policy terms. For a professional earning $300,000 when the policy was set up, that meant a benefit of approximately $210,000 to $225,000 per year if unable to work.
Five years later, the same professional is earning $600,000. The policy still covers $210,000 to $225,000. The gap is $375,000 to $390,000 per year of uninsured income. Over a two-year claim period, that is $750,000 to $780,000 of exposure that nobody is covering.
The mortgage has grown. The school fees have started. The lifestyle has expanded. But the policy is frozen at 2020 income.
These figures are illustrative only and do not represent any specific policy or client outcome.
Why This Happens
Three reasons, and none of them are negligence.
First, the original adviser may no longer be in the industry. The Life Insurance Framework reforms, the FASEA education requirements, and the broader contraction of the advice profession mean that many professionals who received insurance advice five or ten years ago no longer have an active adviser relationship. Nobody is triggering the review.
Second, the insurer does not automatically increase the cover to match income growth. Some policies include indexation provisions that increase the benefit by CPI each year, but CPI indexation does not keep pace with the income growth of a high-performing professional. A surgeon whose income grows from $300,000 to $600,000 over five years has experienced income growth far beyond inflation.
Third, the policy may have been structured inside superannuation at establishment, where the premium was affordable but the definition was weaker (any-occupation rather than own-occupation). The professional may not even know the difference until they need to claim.
Definitions Matter: Income Protection, TPD, and What Most Professionals Miss
This is one of the most misunderstood areas of insurance structuring.
In income protection, some policies use an own-occupation definition, meaning the benefit depends on whether you can perform the duties of the occupation you were working in immediately before disablement, subject to the insurer’s policy terms. Other policies use broader definitions. Some products change definition after a period on claim, moving from own-occupation to any-occupation after two years or 30 months. The definition varies by insurer, product, and benefit period.
In TPD, the distinction between own-occupation and any-occupation is equally critical. Own-occupation TPD pays a benefit if you are unable to perform the duties of your specific occupation. Any-occupation pays only if you are unable to perform any occupation for which you are reasonably suited by education, training, or experience. A surgeon who loses fine motor skills in their dominant hand would likely meet an own-occupation definition. Under an any-occupation definition, they might be told they could lecture, consult, or work in medical administration, and their claim could be declined.
Inside superannuation, TPD definitions are typically any-occupation. Outside superannuation, own-occupation definitions are available but at a higher premium. For specialists and professionals whose income depends on a specific physical or cognitive capacity, the definition matters more than the premium, across both income protection and TPD.
The Three-Layer Insurance Review
Build MyWealth applies a three-layer review to every insurance engagement:
Layer 1: Policy terms against current income and family structure. Is the cover amount sufficient for today’s income, not the income at setup? Is the definition appropriate for your profession? Is the benefit period long enough?
Layer 2: Ownership structure against estate plan. Is the policy owned by the right entity (personal, super, or trust)? Does the ownership align with your beneficiary nominations and estate plan? If the insurance is inside super, does the binding death benefit nomination direct the proceeds correctly?
Layer 3: Premium efficiency inside versus outside superannuation. Premiums paid inside super come from concessionally taxed contributions (15 per cent, or 30 per cent with Division 293 for income above $250,000). Premiums paid outside super come from after-tax personal income (up to 47 per cent). For high-income professionals, the premium efficiency difference can be substantial. However, insurance inside super interacts with the member’s total superannuation balance, which now has Division 296 implications for balances above $3 million.
The correct structuring decision requires modelling across all three layers simultaneously.
When to Review
If any of these apply, a review is overdue:
- Your income has increased by more than 20 per cent since the policy was set up
- You have changed roles, specialties, or employer
- You have started or joined a business partnership
- You have had a child, purchased property, or taken on significant financial commitments
- Your superannuation balance has crossed $500,000, $1 million, or $3 million
- Your existing adviser is no longer active
- You have never had the own-occupation versus any-occupation conversation across both income protection and TPD
What a Review Looks Like
Build MyWealth begins every insurance engagement with the Three-Layer Insurance Review. We assess the current policy terms, the ownership structure, and the premium efficiency across all three layers before recommending any changes.
If the current policy is adequate, we say so. If it needs restructuring, we explain why, model the alternatives, and coordinate implementation with the insurer and your accountant.
If you need to make a claim, we handle the documentation, insurer communication, escalation, and advocacy. Our role is to represent you through the claims process. For more on how we handle claims, see our Claim Assistance page.
For the full insurance strategy framework, see our Risk Insurance Strategy page.
For how insurance interacts with SMSF and Division 296, see our blog post SMSF, Insurance, and Division 296.
General Advice Warning
Any advice in this article is general in nature only and has not been tailored to your personal objectives, financial situation and needs. Please seek personal advice prior to acting on this information.
Current as at March 2026.
About the Author
Sangram Rana is the Principal Financial Adviser, Tax Agent, and Director of Build MyWealth, a boutique independent financial advisory practice at 55 Collins Street, Melbourne. He is a Corporate Authorised Representative (ASIC No. 1306106) of Lifespan Financial Planning Pty Ltd (AFSL 229892), a member of the Financial Advice Association of Australia (FAAA), and a member of the Association of Independently Owned Financial Professionals (AIOFP).
IFA Excellence Awards Finalist: Risk Adviser of the Year 2022, 2023, 2025. SMSF Adviser of the Year 2022, 2023. Client Outcome of the Year 2022.