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Salary continuance insurance

With salary continuance insurance, you’ll receive up to 75% of your regular earnings each month to cover general living expenses if you can’t work due to an accident, illness or injury.

Salary continuance insurance is a type of income protection cover held in a super fund. Premiums come out of your super balance, rather than paying the insurer directly.

What is salary continuance insurance?

Salary continuance insurance provides financial help if you're unable to work due to sudden illness or injury. It's held within a super fund, and you'll pay your insurance premiums from your super balance rather than directly from your bank account. This means that if you make a claim, benefits are paid into your super fund before being released to you.

Some employers offer group salary continuance insurance to their employees. However, it's not tax-deductible and is usually only payable for 2 years, unlike other income protection.

What does salary continuance insurance cover?

Salary continuance insurance can typically cover the following injuries and accidents:

  • Full, permanent disability. If you become permanently disabled, policies will usually pay out 100% of the total monthly benefits for the full benefit period (usually 2 years).
  • Partial disability. This means you can still do some work but can't earn as much as you used to because of the disability. In this case, you may only be paid a percentage of the monthly benefit amount. The exact amount will depend on the situation and how much less you're earning. You can generally keep claiming partial disability for the full benefit period or until you no longer qualify as partially disabled.
  • Death. If you die while claiming salary continuation benefits, a policy might pay out several months of benefits in a lump sum to your estate through your superannuation fund.
  • Recurring disability. If you suffer a recurrence of the same disability that entitled you to a previous claim, it will count as the same injury, and the waiting periods will be waived.
  • Specific injuries. Suppose you suffer any one of the specific injuries laid out in your policy and are still suffering from this injury after the end of the waiting period. In that case, you may be paid monthly benefits depending on what kind of injury it is. For example, a salary continuance policy might pay the full monthly benefits for 3 months in the event of a fractured pelvis, 24 months for total blindness or 60 months for the total loss of multiple limbs.

Group salary continuance insurance

Group salary continuance insurance provides the same benefits as salary continuance insurance. It pays out a monthly benefit of up to 75% of your income when you're unable to work due to illness, accident or injury.

You can only receive group salary continuance insurance if your employee offers it as a benefit of your employment or if you're a member of a group super fund.

Pros and cons of salary continuance insurance

Still not sure if it's for you? Check out the pros and cons:

Pros

  • Convenient if you have just entered the workforce.
  • Premiums are paid from your super so that they won't affect your everyday cash flow.
  • You won't always have to go through a health check to be covered.
  • Tend to be cheaper as the policies are purchased in bulk by employer.

Cons

  • Premiums are not tax-deductible.
  • Most companies will only allocate a 2-year benefit period. This may not be long enough to cover your recovery period.
  • Premiums are paid through your super fund. This will eat into your retirement savings but won't affect your daily cash flow.
  • If you're covered under a salary continuance group policy, your cover will stop when you leave your job.
  • You may experience delays in receiving payment. The insurer pays the benefit into your super and then it will be paid out to you.
  • If your super contributions stop, your super falls below $6,000, or you change funds, your insurance might stop too.
  • Claiming can be complicated, especially if you don't have a nominated beneficiary.

Salary continuance insurance vs income protection

Salary continuance insurance and income protection both ensure you won't lose all of your monthly income if an illness or injury forces you out of work. However, the main difference between the 2 is how you get them.

You can receive income protection as an individual or through group insurance via your superannuation fund. On the contrary, salary continuance insurance is only available through your super, usually via your employer.

Compare income protection policies from Australian providers.

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