Life is unpredictable and we can never tell what to expect tomorrow. One of the most important work factors to many people is job security. Just the knowledge that you have a job to go to should be encouraging, given the uncertainty we face every day.
Every year, millions of people find themselves unable to work because of a serious illness or a work injury.
In such instances, people find themselves struggling to make a living, unless they have protected themselves by getting salary replacement insurance.
What is salary replacement insurance?
This is a long-term insurance policy that helps you when you aren’t able to work. This insurance replaces part of your income and pays out until you can start working again. It also provides cover for most illnesses that leave you unable to work. You can also claim as many times as you need to, while the policy lasts.
Salary replacement insurance is designed to replace your income and pay out a tax-free monthly sum.
Short term income protection policies usually provide cover for 6 to 12 months. Long term income protection provides cover for if you become so ill that it’s unlikely you’ll be able to work again.
So how much is enough for salary replacement insurance?
One can’t say for sure how much will be enough, but there are ways that you could estimate how much you might need in the long run.
The secret to buying a policy that will last you for the right amount of time is figuring out how long you need to be insured. This usually means that the degree of your disability needs to be determined first. The good news is that many financial institutions will be willing to provide salary replacement insurance for temporary disability.
A CNN article says: “Some financial planners say that you need enough insurance to replace five to seven years of your salary. Remember, the sole purpose of life insurance is to replace your income in case you die, so that your dependants can maintain their current lifestyle.”
In addition, how much cover you need will depend on your circumstances.