Salary insurance explained: How your state and industry affect your cover
Understand salary insurance in Australia and how your state and industry salary index influences the level of cover you might need. Learn from ABS data and Fair Work pay guides.
Salary insurance, often called income protection, is not directly tied to a specific index figure, but your salary relative to the national line (index 100) helps determine the amount of cover you may need. For example, a worker in Western Australia (index 106.9) may insure a higher income than someone in Tasmania (index 88.6).
What is salary insurance?
Salary insurance is another name for income protection insurance – a policy that pays you a portion of your regular income if you can’t work because of illness or injury. In Australia, it’s often sold through superannuation funds or as a standalone retail product. The amount you can insure is usually capped at 75–85% of your pre-tax salary, which means knowing where your pay sits against the national line is a practical first step.
The Salary Index uses the Australian Bureau of Statistics’ full-time adult ordinary-time earnings as its benchmark – $2,083.70 per week or $108,352 a year. That’s index 100. If your gross annual salary is $130,000, your index is roughly 120. If it’s $80,000, your index is about 74. Those numbers matter for salary insurance because they tell you how much income you might need to replace.
State differences in salary insurance needs
Where you live changes the typical income you’d insure. The ABS publishes average weekly earnings by state, and we’ve turned them into index figures. For example:
- ACT index 109.9 – average annualised $119,090
- Western Australia index 106.9 – $115,825
- New South Wales index 101.2 – $109,658
- Victoria index 98 – $106,137
- Queensland index 97.9 – $106,064
- Northern Territory index 95.2 – $103,173
- South Australia index 94.6 – $102,450
- Tasmania index 88.6 – $96,008
If you live in the ACT or WA, your salary insurance policy would typically cover a higher dollar amount than if you lived in Tasmania or SA, assuming you insure the same percentage of your income. That doesn’t mean premiums are proportionally higher – insurers also look at your occupation, age, health, and waiting period. But the base income figure is a key input.
For a worker on the national minimum wage ($26.44/hr, index 48.2), salary insurance might cover around $40,000 a year. For a miner in WA on an index of 154.7, the insured amount could be $167,000 or more. The gap is wide, and it reflects real differences in cost of living and earning power across states.
Industry differences and salary insurance
Your industry affects both your income level and the risk profile that insurers use. The industries page shows index figures for major sectors:
- Mining 154.7
- Professional, scientific and technical 114.7
- Education and training 105.5
- Health care and social assistance 97.8
- Retail trade 75.9
- Accommodation and food services 72.5
A mining engineer on a high salary might pay a lower premium per dollar of cover than a retail worker, because the engineer’s occupation is often rated as lower risk for disability. But the total premium will be larger because the sum insured is higher. Conversely, a retail worker on a lower salary may have a smaller premium but a higher risk rating if their job involves manual handling.
Some modern awards include provisions for salary continuance insurance – for example, in the Mining Industry Award or certain enterprise agreements. The Fair Work Ombudsman’s pay guides list minimum rates and allowances, but they don’t mandate insurance. You’d need to check your award or agreement for any employer-provided cover.
How the salary index helps you benchmark salary insurance
The how the index works page explains the calculation: your yearly gross salary divided by the national line ($108,352) times 100. Once you know your index, you can estimate the maximum income you could insure (usually 75–85% of that figure). For example:
- Index 100 → $108,352 → max cover ~$81,264–$92,099
- Index 120 → $130,022 → max cover ~$97,517–$110,519
- Index 80 → $86,682 → max cover ~$65,012–$73,680
These are rough guides. Actual policies have waiting periods, benefit periods, and exclusions. But the index gives you a starting point to compare your earnings with the national average and with other states or industries.
Tax and super considerations
Salary insurance premiums are tax-deductible if you hold the policy outside super. Inside super, the premium is paid from your super balance, which reduces your retirement savings but may be cheaper due to group rates. The super guarantee is 12% from 1 July 2026, and the maximum contribution base is $270,830. If you’re on a high index (say 150+), your super contributions are capped, so salary insurance inside super might be limited.
Resident tax rates for 2026–27 (excluding Medicare) are: nil up to $18,200; 15% to $45,000; 30% to $135,000; 37% to $190,000; 45% above. Medicare levy adds 2%. If you claim a tax deduction for salary insurance premiums, it reduces your taxable income, which can be significant for higher-index earners.
Putting it together
Salary insurance isn’t a one-size-fits-all product. Your state and industry shape both the income you need to protect and the cost of that protection. The states page lets you see how your local average compares, and the industries page shows sector benchmarks. Use the salary index to understand where you sit, then talk to a financial adviser or insurer about the right level of cover.
Remember: the index figures are gross ordinary-time benchmarks, not a quote for a person or a job offer. Modern awards can pay more than the national minimum wage, and enterprise agreements may include additional benefits. Always check your specific circumstances before buying a policy.
Questions people ask
How does my state affect salary insurance premiums?
Insurance premiums for income protection are often based on your income level. States with higher average salaries, like ACT (index 109.9) and WA (106.9), may lead to higher premiums because you insure a larger income. Conversely, lower-income states like Tasmania (88.6) may have lower premiums. However, insurers also consider occupation risk, age, and health.
Does industry matter for salary insurance?
Yes. Industries with higher average earnings, such as Mining (index 154.7) and Professional services (114.7), typically have higher insured amounts. Additionally, some industries have higher occupational risk (e.g., construction vs. office work), which can affect premium rates. Your specific job duties matter more than the industry average.
What is the relationship between salary index and salary insurance coverage?
The salary index compares your gross annual salary to the national full-time adult ordinary-time earnings ($108,352). If your salary is above the national line (index >100), you may need more insurance cover to replace that income. The index helps benchmark your earnings, but insurance coverage is a personal decision based on your expenses and financial goals.