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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.
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."
Yes, but most income protection policies have built-in offset clauses. This means you can generally only insure up to 75% of your salary. This is to prevent you from taking out 2 policies and trying to claim on more than 100% of your policy.
No, unlike standalone income protection, premiums are not tax-deductible with salary continuance insurance.
Ordinarily, it's you. Premiums are deducted from your super account. Some companies will apply for a group salary continuance insurance policy as part of a benefit they give to employees. Some superannuation funds will also include certain policies by default or as optional extras. Different parties may be paying premiums depending on the situation.
Your employer might pay the full amount
Your employer might pay a partial amount
Premiums may be getting deducted from your superannuation contributions
Premiums may be deducted from your salary or wages
Salary continuance insurance is not usually underwritten. It's one of the few ways Australians can access affordable cover free from medical underwriting.
The main difference between salary continuance and income protection is that the former is only available through your super fund. However, there are a few other important differences.
No. It generally only covers you if you cannot work due to an illness, injury or accident that prevents you from doing your job. If you want cover for involuntary redundancy, look at redundancy insurance.
Usually, you'll have the option of a 30, 60 or 90-day waiting period. To work out which waiting period works best for you, it's important to calculate how long you can rely on your own savings and any sick pay that you're eligible for to support yourself. Remember, you'll need to pay a higher premium if you want to opt for a shorter period of time.
Most insurers will pay out salary continuance benefits for up to 2 or 5 years until you turn 65. You'll need to weigh up the cost of the premium with your general expenses to find the most appropriate benefit period for you.
This depends on your age, gender, occupation and how much cover you're looking for. If you work in a high-risk environment or are at higher risk of illness or injury in your job, you may have to pay a higher premium.
Gary Ross Hunter was an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio
Gary Ross's expertise
Gary Ross has written 695 Finder guides across topics including:
Lily Jones is a writer at Finder. As well as specialising in travel, Lily also writes for the shopping and legal teams and is a dab hand at reviewing software for small businesses. Lily has a Bachelor of Arts in Russian and Management Studies from University College London. Her passion for travel, food and experiencing new cultures has taken her around the globe, and you’ll always find Lily planning her next adventure. See full bio
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