Salary continuance insurance: It’s income protection with a twist. 

If life throws a curveball, salary continuance insurance can protect up to 75% of your monthly earnings.

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By

Cameron Thach

&

Gary Ross Hunter

Updated

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Key takeaways

  • Your premiums are taken directly from your super balance, and any claims are initially paid into your super account before being released to you.
  • It spares your daily budget but can affect your future retirement.
  • Generally, you'll get up to 75% of your regular salary while you're unable to work.

What is salary continuance insurance?

Salary continuance insurance offers financial support if you're unable to work due to sudden illness or injury. It's held within a super fund, meaning your premiums are deducted from your super balance instead of your bank account. When you make a claim, benefits go into your super before being released to you.

You can purchase salary continuance cover from your own superfund or your employer may provider group salary continuance as part of its benefits. This can be paid for by the employer, or there can be an arrangement whereby the employer pays for a portion and the employee pays for the other portion, or the employee can pay for it all.

It's worth noting, unlike income protection insurance, your premium payments aren't tax-deductible and benefits are usually only payable for two years.

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. This can be referred to as a bereavement benefit. If you die while claiming salary continuation benefits, a policy might pay out several months of benefits in a lump sum to your estate or beneficiary through your superannuation fund. It's important to note, this is not included in all policies.
  • 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.

What does salary continuance insurance not cover?

There are a few scenarios where salary continuance insurance won't cover you, including:

  • Non-compliance with treatment. Refusing to undertake treatment or rehabilitation, or failing to attend a medical examination can be grounds for a provider to suspend or stop your payments.
  • Intentional or careless injury. If you've committed any self-inflicted injury or attempted suicide, your policy might refuse to pay out your benefits. Claims related to high risk activities like extreme sports may also be excluded.
  • Childbirth complications. With some providers, your claim may be refused if you're injured or have fallen ill from pregnancy or childbirth. This can apply if it's a normal or uncomplicated event.
  • Death. If you've passed away, providers will stop your regular payments. However, depending on the provider, a bereavement benefit may be paid out. Only some policies have this bereavement benefit and it does not seem to be the standard among them.

What are the waiting periods for salary continuance?

The waiting period for salary continuance is the time you'll have to wait before you start receiving benefits after becoming disabled due to illness or injury. Most policies offer a choice of a number of days, which can look like:

  • 30 days
  • 60 days, or
  • 90 days

This waiting period typically starts the day that a medical practitioner examines you and certifies that you are totally disabled. During this time, you are not eligible to receive benefits, but you may sometimes return to work for a limited number of days. If this happens, the days you worked will be added to your waiting period.

What are the benefit periods of salary continuance?

The benefit period for salary continuance insurance is the length of time you can receive payments if you're unable to work due to illness or injury.

Typically, this lasts up to two years, but some policies may offer longer options, like five years or until you reach a certain age, such as 60 or 65. The exact duration will depend on the specific policy you choose.

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. Many group plans offer automatic acceptance for employees.
  • 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.
  • Tends to be cheaper than income protection insurance, as superfunds and employers buy it in bulk.
  • Some policies may include rehab support or counselling services.

Cons

  • Premiums aren't 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 group salary continuance policy, your cover might 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.

How does group salary continuance work?

Group salary continuance insurance is purchased by an employer to cover the group of people it employees. As an employee, this means you won't have to purchase anything, and it will be offered as part of your employment.

To access group salary continuance you'll usually have to sign up with your employers nominated superfund. A business might also have an arrangement that lets you use your own superfund.

The level of cover you get will be the same as normal salary continuance insurance. However, as a benefit of employment, employers will usually cover a portion or the full cost of premiums. This doesn't necessarily mean it's free, and whether your employer pays for the premiums partially or in full, will be up to the arrangements of the employment.

If you happen to leave your job, it's possible to keep salary continuance cover, but you'll have to meet a few conditions and it may cost you more. You'll be transferred to a different category, which some providers call the 'Ex-Employee Division'. This typically comes with higher premiums for the same level of cover and you'll need need the following criteria:

  • Under the age of 65
  • Entering permanent or fixed term employment.

Just remember, if you don't meet certain requirements within about 60 days, your coverage could stop.

What is the difference between salary continuance and income protection?

The main difference between salary continuance insurance and income protection is how you get them and the level of cover you get.

Typically, income protection insurance is bought through a provider or broker. On the contrary, salary continuance insurance is only available directly through a superfund or via your employer.

Because salary continuance insurance is bought in bulk by a superfund or employer, insurers aren't as strict with offering cover, and some even automatically accept you. So it can be a lot easier to get cover for pre-existing conditions compared to income protection insurance. This can be helpful if you've exhausted your sick leave and need ongoing support. If you've just had a serious injury like a broken leg, or during treatment for a chronic illness like cancer.

However, this lower barrier to entry comes with a much shorter length of cover than income protection insurance. Additionally, you won't have the same level of flexibility with waiting periods and coverage options.

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Our expert says

"One of the most important differences between salary continuance insurance and income protection is that you usually have more control when you take out individual income protection. You won't have to worry about losing cover when you move jobs, and you'll have more customisation options with individual policies. However, it can be more expensive, and you'll need to pay the premiums directly from your bank account rather than your super."

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With a background in writing across education, Web3, and finance, Cameron’s mission is to create content that speaks directly to readers in a way that’s easy to understand, helping them navigate complex topics with confidence. Cameron studied a Bachelor of Commerce, Economics and Marketing at Macquarie University, graduating in 2019. See full bio

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Gary Ross Hunter has over 6 years of expertise writing about insurance, including life, health, home, and car insurance. Having reviewed hundreds of product disclosure statements and published over 800 articles, he loves simplifying complex insurance topics for everyday readers. Gary has contributed to major outlets like Yahoo Finance, The Sydney Morning Herald, and news.com.au, and holds a Bachelor of Arts (Honours) in English Literature from the University of Glasgow, along with a Tier 2 General Advice certification, ensuring his work adheres to ASIC’s RG146 standards. See full bio

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Gary Ross has written 519 Finder guides across topics including:
  • Health, home, life, car, pet and travel insurance
  • Managing the cost of living
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