Salary Protection 101
What is salary protection?
It may not be as well known as life or disability cover, but salary protection can be a lifesaver if you find yourself unable to bring in an income because of illness or injury. This type of insurance acts as a safety net for you and your family when you can’t work. How? By paying you a percentage of your salary in regular monthly payouts until you go back to work – or until a set retirement age if you can’t ever work again.
Salary protection enables you to cover your cost of living if something happens to you – and it’s even more essential if you’re the primary breadwinner. If you’re considering salary protection cover, it pays to do your homework. Not all insurers offer the same benefits, so make sure you know exactly what is covered and what isn’t, how much you’ll be paid out and for how long, any factors that could affect future claims, and how long your cover is valid for.
- Typically covers temporary and permanent disability.
- In most instances, provides you with monthly payments while you’re unable to bring in an income.
- Payments are usually a percentage of your monthly salary.
- Payments generally continue until you can start working again or until a set retirement age.
Why do I need it?
Would you still be able to pay the bills and cover your cost of living if you couldn’t work because of illness or injury? If not, then you may need salary protection, regardless of whether you’re single, married or have children.
Salary protection essentially replaces your monthly income, meaning that you can pay your bills and maintain your standard of living if something happens to you. Monthly salary protection payouts will enable you to cover costs like your bond repayments, your children’s school fees, car repayments and your day-to-day expenses.
If you work for a company that provides group income protection, you may already have this type of cover. In this case, it may be a good idea to determine whether this cover is enough to meet your needs or whether you need to top up with additional insurance.
How much cover is enough?
We all have different needs. If you’re single and don’t have long-term debt you may need less cover than someone with children and a bond to repay. The amount of cover you’ll be eligible for and the cost of your monthly premiums will depend on factors like your age, health, lifestyle, hobbies and occupation, and your income requirements.
If you do opt for salary protection, bear in mind that circumstances and needs change over time. You may be earning more or less than when you originally took up your policy, or you may now be self-employed or have dependents. It’s worth reviewing your policy from time to time to ensure that it still meets your needs and that you’re not over- or underinsured.
Also make sure that you’re aware of any factors that could affect future claims or your monthly premiums. If you change jobs, stop or start smoking, or take up a risky sport, let your insurance provider know as they may need to adjust your terms. If your lifestyle factors have improved, you could end up paying lower monthly premiums.