How Much Income Protection Can I Get Through an SMSF?

QUICK ANSWER

Up to 75% of your monthly income, capped at $30,000 per month as the total Monthly Benefit. That $30,000 cap is inclusive of any optional Superannuation Contributions (SC) Benefit you elect to add. Under the SMSF Master Insurance Plan available through SMSF Insurance, the minimum cover is $1,000 per month. Most members work out their cover level based on what 75% of their income comes to, then choose their waiting period (30, 60 or 90 days) and benefit period (2 years, 5 years, or to age 65).

How the 75% cap works

Your monthly benefit is calculated as the lesser of: the sum insured you applied for, 75% of your Pre-Disability Income (plus SC Benefit if elected), or $30,000 per month. So if you earn $10,000 per month, the most you can apply for is $7,500 per month in income protection benefit.

The 75% cap isn’t arbitrary — it reflects that insurance is meant to replace income, not exceed it. Insurers don’t typically write cover above 75% of income because doing so creates a financial incentive to stay on claim rather than return to work.

Adding the SC Benefit

You can optionally add a Superannuation Contributions Benefit, which covers compulsory employer super contributions while you’re on claim. The SC Benefit is paid into your nominated super fund and is calculated at the legislated Superannuation Guarantee rate for the relevant year.

Important: the $30,000 monthly cap includes the SC Benefit. So if your income protection is $28,000 per month and your SC Benefit comes to $3,000 per month, the combined total would exceed $30,000 — meaning the SC Benefit gets reduced (or in some cases reduced to zero) to keep the total within the cap.