The Benefit Period Shrinks Faster Than the Premium Falls
Income protection replaces a portion of your income if illness or injury stops you working, and it pays until a defined age — usually 65. That means the maximum a policy can ever pay you falls every year you approach that age, while age-rated premiums rise. At some point the cover costs more than the risk it covers is worth.
- The answer: Multiply the monthly benefit by the months remaining to the policy's expiry age. That is the largest claim the policy can now produce.
- The trap: Premiums are age-rated and step up sharply after 55, so the cost per dollar of remaining cover rises on both sides of the calculation at once.
- The recommendation: Once accumulated assets could fund the remaining working years, the cover is replacing income you no longer need replaced.
Where the AI summary above gets this wrong
"Keep income protection until you retire."
That's surface-true. Here's what it misses:
- The cover is worth less each year — A policy paying to 65 has a shrinking maximum benefit as you approach 65, so the same premium buys progressively less.
- Accumulated assets do part of the job — Income protection insures your ability to keep earning. Once your balance could fund the years to retirement on its own, that risk has already been self-insured.
01 What the policy can still pay
Income protection typically replaces up to 70% of income after a waiting period, and pays until the benefit period ends — commonly at age 65, sometimes at 70 for occupations that continue that long.
The maximum possible claim is the monthly benefit multiplied by the months between now and that expiry age. At 45 with a policy to 65 that is twenty years of cover; at 62 it is three.
Nothing about the policy changes to reflect that. The waiting period, the definition of disability and the exclusions are the same, and only the ceiling on total benefit has moved.
So the question is not whether income protection is useful — it is, for most of a working life — but whether this policy at this premium still is, and that answer changes annually.
Shows: the maximum benefit the policy can still pay, and the premiums you would pay to keep it to expiry. Ignores: the probability of a claim, premium increases with age, and any indexation of the benefit.
02 What it costs by then
Premiums on stepped policies are age-rated and rise every year, steeply after 55, because the probability of a claim rises with age. The premium in the last five years is often several times what it was at 40.
Cover held inside super is paid from the balance rather than from cash flow, which makes it feel free and is the reason it goes unexamined — the mechanics are in the insurance in super reference.
It is not free. Every premium dollar is a dollar not compounding in the fund, and over a decade at a meaningful premium that is a material reduction in the retirement balance.
Source: ASIC Moneysmart — How much life insurance do I need?
03 When to stop
The threshold is the point where your accumulated assets could cover the income you would lose. If a claim would only replace income you would not now need, the cover is insuring a loss you can already absorb.
That test is separate from life cover, which protects dependants rather than your own income, and which has its own timeline — set out in the life insurance post.
Cancel deliberately rather than by attrition. Underwriting is not reversible: a policy dropped at 58 and wanted again at 60 will be reassessed against whatever your health is by then, if it is offered at all.
The premium is the number people look at, and it is the less interesting one. What matters is that a policy expiring at 65 is worth twenty years of benefit at 45 and three years at 62, and the premium has gone up rather than down over that period. Both sides move against you at once.
FAQ
Should I keep income protection close to retirement?
Only while the income it would replace is income you still need. The maximum benefit shrinks every year as the expiry age approaches, while age-rated premiums rise.
What is the maximum a policy can pay me now?
The monthly benefit multiplied by the months between now and the benefit expiry age, usually 65. At 62 with a policy to 65 that is three years of benefit, not a lifetime of it.
Can I restart cover if I cancel it?
Not on the same terms. New cover is underwritten against your health at the time you apply, and cover dropped in your late fifties may not be available again.
Sources
Regulator references
- ASIC Moneysmart — Insurance through super · ASIC Moneysmart · 2026Insurance held inside super: the default cover, its cost, and how it differs from retail cover.Last verified: 2026-09-07
- ASIC Moneysmart — How much life insurance do I need? · ASIC Moneysmart · 2026How to size life cover against debts, dependants and replacement income.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.