How do waiting period and benefit period choices affect my premiums?

The waiting period and benefit period you select are two of the most significant factors affecting your Income Protection premium, potentially varying costs by 200-300% or more. Longer waiting periods dramatically reduce premiums: choosing a 90-day waiting period instead of 14 days can reduce your premium by 40-60%, as the insurer avoids paying for short-term claims, which are the most common. For example, a policy might cost $150/month with a 14-day wait, but only $75/month with a 90-day wait. The benefit period has an even larger impact: a 2-year benefit period might cost $80/month, while the same coverage with a benefit period to age 65 might cost $180/month or more - over double the premium. This is because the insurer's exposure to long-term claims is far greater with extended benefit periods. To optimize your coverage affordability: select the longest waiting period you can financially manage based on your savings and sick leave entitlements (most advisers recommend at least 30-60 days if you have emergency savings), and choose the longest benefit period you can afford, as this protects against catastrophic long-term disability. Many people choose 2-year benefit periods to save money, but this leaves them vulnerable if they suffer a serious condition like cancer or severe injury requiring years of recovery. A cost-effective compromise is a 60 or 90-day waiting period with a benefit period to age 65, providing comprehensive protection at a more manageable premium cost. Review these selections every few years as your financial situation changes.