Waiting periods explained: the sick-leave maths most people get wrong

If you’ve ever chosen the excess on your car insurance, you already understand waiting periods. A higher excess means a cheaper premium, because you’re agreeing to wear more of the cost yourself before the insurer steps in. The waiting period on income protection is the same deal, except the excess is measured in weeks of your life without a pay cheque instead of dollars.

And that’s exactly why it deserves more than the thirty seconds most people give it. The waiting period is one of the biggest levers on both the price of the cover and how it actually feels to claim on it.

What is a waiting period, exactly?

It’s the stretch of time you need to be off work due to illness or injury before benefit payments start accruing. Per MoneySmart, waiting periods commonly range from 14 days up to two years, with plenty of options in between. Benefit periods, the other bookend, commonly run for two years, five years, or to a set age such as 65.

Source: ASIC MoneySmart, income protection insurance.

One mechanical detail worth knowing, because it trips people up: depending on the policy, benefits are often paid in arrears. So even once the waiting period ends, the first payment may land some weeks after that. The gap between your last pay cheque and your first benefit payment can be longer than the waiting period printed on the policy. Check how your policy handles this in the PDS.

Why not just pick the shortest wait?

Because you pay for it. The trade-off runs like this:

Waiting period	What it generally means for premiums	Who tends to weigh it up
Short (e.g. 14 to 30 days)	Dearest option, the insurer is on the hook quickly	People with little leave or savings, some self-employed
Medium (e.g. 60 to 90 days)	Middle of the range	People with a reasonable leave balance or buffer
Long (e.g. 6 months to 2 years)	Generally the cheapest	People with big buffers, or other cover carrying the early months

No row of that table is “correct”. The question is what you’re genuinely covering. Paying extra for a 14-day wait when you’re sitting on months of leave is buying insurance for a gap you don’t have. Choosing a two-year wait with three weeks of savings is the opposite mistake, and a worse one.

The sick-leave maths, done honestly

Here’s where most people get it wrong. The back-of-envelope version goes: “I’ve got about three months of sick leave, so a 90-day wait is fine.” Sometimes that’s true. But the honest version of the maths asks harder questions:

1. How much leave do you actually have, in days, right now? Not roughly. Log in to payroll and look. People routinely overestimate this.
2. Would it be paid at full rate for the whole stretch? Some entitlements and arrangements taper. If part of your leave runs at reduced pay, your “three months” of full income might be shorter than you think.
3. What happens if you’d already used some? Leave balances are lowest right after the rough patches, which is exactly when a second problem tends to arrive.
4. If you’re self-employed, the answer is usually zero. No leave, no employer, no buffer except savings. The waiting period question hits differently when every week of the wait comes straight out of your own pocket.
5. How long would your savings genuinely carry the household? Mortgage, groceries, school costs, at real spending levels, not optimistic ones.

Add your honest leave to your honest savings runway. That number, in weeks, is the longest waiting period your life can actually absorb. It’s worth checking against whatever waiting period is sitting on your current policy, especially if the cover was set up years ago when your leave balance, family and mortgage all looked different.

What’s the catch?

A detail that surprises people: the waiting period on the default income protection inside many super funds wasn’t chosen with your leave balance in mind, because nobody knew it. It was set for a typical member. Your policy might have a wait that’s too long for your actual buffer, or you might be paying for a short wait you don’t need. Either way, the mismatch is invisible until you’re off work, and that’s a rough time to discover it.

The other catch: the waiting period and the benefit period work as a pair. A cheap policy might get its price from a long wait and a short benefit period, which means it starts late and stops early. Always read the two numbers together.

Where to from here

Dig out your policy or your super fund’s insurance guide and find two numbers: the waiting period and the benefit period. Then do the leave-plus-savings maths above. If the numbers don’t line up, or you’d rather have someone sanity-check it with you, book a no-obligation chat with Justin. If your current setup already fits your buffer, he’ll say so and that’s that.

Related reading

• The types of personal insurance
• Insurance documents explained
• Reviewing your existing cover

General advice only. It does not take into account your objectives, financial situation, or needs. Consider whether it is appropriate for you and read the relevant Product Disclosure Statement (PDS) before deciding. Whether a benefit is payable depends on the specific policy terms.