A recent study has shown that many Australian families are likely to be under insured. The report, compiled by Rice Walker Actuaries, found that even people with the average amount of superannuation still actually had less than 20 percent of what they would need, should the breadwinner of the family be unable to provide an income for any reason.

The importance of Salary Protection Insurance

These findings are extremely worrying when you take into account the financial, not to mention the emotional, stress experienced by families under such circumstances. The loss of a family member’s ability to bring home an income, whether through death, or disablement, is a blow many under insured families needlessly and continuously suffer from every day. The effects are even more devastating when you consider that sufficient life insurance, as well as salary protection insurance cover, is readily available. The reason such unnecessary exposure exists is that many families don’t take the time to consider their position should such a disaster hit them.

Keep Your Income Protected With Income Protection Insurance

Whatever your situation, for any family to be able to function properly, certain ongoing debts have to be regularly met, such as the rent or mortgage costs, car payments and running expenses, schooling costs, and of course food and clothing. These are just the basics, but you have to consider how you would pay them if the income your family relies on wasn’t available, and when this doesn’t happen, the world as you previously knew it can quickly fall apart.

This is why it is important to ensure your family and everyone you are responsible for will not find themselves in a position of struggle and hardship should you, for some reason beyond your control, be unable to provide financial support to the level they have become accustomed.

How to Choose the Best Salary Protection Insurance

One of the most important matters to take care of now, so your family doesn’t suffer needlessly in the future, is to make sure you have sufficient salary protection insurance. By doing this you can ensure you have the following protection:

• Seventy-five per cent of your salary paid monthly as a benefit.
• Cover which extends to accidents, major traumas and illnesses.
• Payments which start after a stipulated waiting period and continue until you can return to your usual employment again.
• If you are unable to resume work, you will need payments which can continue until you reach 65 years of age (this usually depends on your occupation).

How Salary Protection Insurance Works

You will have to pay tax on your income protection payments as they are the continuation of your salary, as the payments are structured to allow you to continue paying your mortgage or rental costs, help you to keep feeding your family and to adequately clothe them while you remain incapacitated.

Salary protection insurance works much the same way as total and permanent disability insurance, in that you can obtain cover for protection should you be unable to remain employed in your chosen occupation for which you are trained, because of an illness or injury occurring. You can also arrange cover where you might be willing to take up alternative work if no work in your specific occupation is available. In this way the choice will then be yours to make.

Most salary protection insurance policies won’t cover you when your injury or illness is minor or temporary as they have a certain waiting period stipulated before the cover can begin to be paid. This means if you are off work due to a temporary illnesses, such as the fly or a virus, no payments will be made to you and your family. You will generally be given a choice as to what length of waiting period you will feel comfortable with. The shorter the waiting period the higher the premium.

Who needs salary protection insurance?

If you are a single person with no dependent children, salary protection cover might make more sense than a life insurance policy. In your case the biggest risk might be an incident occurring whereby your ability to continue earning a living could seriously affect your accepted standard of living. At this stage in your life you would not have to consider leaving funds behind should you die, to support dependants.

Whatever your personal situation there are three main types of salary protection insurance for you to consider:

• Indemnity – Indemnity policies are those usually contained in your superannuation fund with the premium being paid through your superannuation account. Superannuation based salary protection insurance is the cheapest way of getting cover but such insurance usually contains fewer features and is not as flexible as other variations.
• Agreed value – This type of cover carries a higher premium but has a better payout and is more likely to represent your true earning capacity. It will not fluctuate as a salary might, as the payments to be received will have been agreed to when you took out the policy.
• Indemnity value policy – With this cover you verify your income when making your claim and your benefits will be adjusted to suit. This can be problematic at times, especially if your salary tends to fluctuate because you work part time or if you happened to become unemployed before the incident occurred.