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Salary continuance insurance

What is salary continuance insurance and is it worth it?

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Salary continuance insurance offers you some protection against loss of income if you're unable to work due to an accident, injury or illness. It is very similar to income protection insurance, but it is not the same. Unlike income protection, salary continuance insurance is only available through superannuation funds and usually has a more limited range of benefits.

What is salary continuance insurance?

Salary continuance insurance provides you with a monthly financial payment if you are forced to temporarily or permanently stop work due to an illness, injury or accident. It's similar to income protection but is held within a super fund. This means that you pay insurance premiums out of your super balance rather than paying directly from your bank account.

It's most commonly offered to employees in a group plan and can be a really helpful backup should something go wrong. However, it's not tax-deductible and is usually only payable for two years, unlike income protection.

Check out some income protection options and compare

If you're looking for protection that is outside of superannuation, salary continuance insurance is probably not for you. Income protection insurance offers cover for up to 85% of your income and is generally more comprehensive than group salary plans put together by employers. It also means you won't be restricted by super rules when accessing your benefits. Compare income protection insurance with some of our partners below.

Name Product Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Multiple Waiting Periods
Medibank Standard Income Protection
$7,500
75%
5 years
Medibank health members save 10% every year. T&Cs apply.
Insuranceline Rate Saver Income Protection
$10,000
85%
5 years
Get a $100 bonus gift after 2 months. Plus get 12 months cover for the price of 11 if you pay annually. T&Cs apply.
AAMI Income Protection
$10,000
75%
5 years
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Types of salary continuance

The two main types of salary continuance insurance are:

  • Permanent. In the event of total permanent disablement policies will typically pay out 100% of the total monthly benefits for the full benefit period. Total and permanent disability means being unable to work any job with no signs of recovery.
  • Temporary. Salary continuance cover will only pay you for a specific period of time, unlike income protection, which usually stops at 65. The total, maximum amount of time the policy can pay out for is known as the benefit period. This is typically for two years after the end of the waiting period, but may vary depending on the policy. The benefit period is the maximum amount of time you can get benefit payments, even if you're still disabled and unable to work after that.

What does salary continuance insurance cover?

Below is a list of some of the injuries and accidents salary continuance insurance can sometimes cover:

  • Full, permanent disability. If you become permanently disablement, policies will usually pay out 100% of the total monthly benefits for the full benefit period (usually 2 years).
  • Partial disability. This means you are still able to do some work, but are not able to earn as much as you used to because of the disability. Here you may be paid only some of the monthly benefit amount. The exact amount might depend on the situation and how much less you're earning now. You are generally able to 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 which entitled you to a previous claim, then it will count as the same injury and the waiting periods will be waived.
  • Specific injuries. If 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, 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.

Salary continuance insurance benefit

Benefit payments for salary continuance are usually made on a monthly basis. They will start at the end of your waiting period, which is usually between 30 and 90 days. This is the time you have to wait after you have put in a claim and it has been accepted.

How long will I continue to receive a salary continuance insurance benefit?

Most salary continuance policies have a benefit period of two years. This means you can receive 24 monthly payments in total, usually at 75% of your income, while you're not able to work. However, this payment will stop at the end of the benefit period, even if you're still unable to work.

Group salary continuance insurance

Group salary continuance insurance, sometimes referred to as group income protection, is another type of cover that provides a monthly benefit to replace up to 75% of your income, when you are unable to work in normal capacity due to an illness or injury. Group salary continuance cover is only available to employees and members of group super funds. It's often cheaper because it's purchased at wholesale rates. However, there are a few drawbacks as well.

BenefitsDrawbacks
  • Salary continuance policies are purchased at wholesale rates. This means you will be paying lower premiums to that of individually owned policies.
  • Minimal-fuss application. Simple level of administration is required from the insurance provider.
  • Automatic acceptance. There is no medical examination required.
  • Smokers can get access. The same affordable premium rates as non-smokers.
  • Premiums deducted from super contributions. Super fund members can get their premium payments deducted from their superannuation account, instead of paying from their after-tax income.
  • More cover than WorkCover. Group cover provides a more comprehensive protection compared to Work Cover and/or health insurance.
  • Some benefits and additional options are not available. It can be less comprehensive compared to individually owned policies.
  • Most group salary continuance insurance providers do not offer agreed value policies. This means there may be a gap between what is provided and what is actually expected and/or needed.
  • It may not be transferable. If you changed jobs or moved to a new super fund, you may no longer be able take advantage of the discounted rate of your employer's group policy.
  • Cover can be voided without you knowing. If your employer doesn't make payments into your super fund on time your cover may become void.
  • Retirement savings will reduce over time. This is because your premium payments are deducted from your superannuation.
  • There may be longer processing time when you claim. This could result in a delay in receiving the benefits.
  • No tax deductions. You cannot claim your group policy premium payments through your super fund as tax-deductible.

Pros and cons of salary continuance insurance

Still not sure if it's for you? Check out the pros and cons of salary continuance insurance below:

Pros

  • Could be suitable if you have just entered the workforce.
  • Doesn't impact your cash flow as premiums are taken directly from your super balance.
  • Premiums tend to be cheaper than standalone policies because they are usually bought in bulk.
  • Some funds automatically accept you for cover without a health check.

Cons

  • Premiums are not tax-deductible.
  • You only receive a two-year benefit period, which may require a longer period of recovery.
  • Premiums are paid through your super fund, which will eat into your retirement savings.
  • If you're covered under a salary continuance group policy, your cover will stop when your employment has been terminated.
  • There can be hold-ups in receiving payment because the insurer pays the benefit to the super fund, which will then pay you.
  • If your super contributions stop, your super falls below $6,000 or you change funds, your insurance may cease.
  • Claiming can be complicated, especially if you don't have a nominated beneficiary.

Multiple salary continuance insurance policies

Some of the features and options of multiple salary continuance insurance policies may include (but not limited to):

  • Your choice of benefit period. You have the option to choose how long you would like to be covered for, usually from 2 years, 5 years or up until the age of 65.
  • Your choice of waiting period. Waiting period is the amount of time you will have to be unable to work until you receive your first benefit payment and it is usually available from 30, 60, 90 or 180 days.
  • Death benefit. A multiple of the insured salary amount is payable if the policyholder dies.
  • Total and permanent disability benefit. A benefit amount is payable if the insured employee is unable to work due to an illness or injury.
  • Partial disability benefit. If the policyholder can only work at a reduced capacity due to an illness or injury after a predetermined amount of time from suffering from a total disablement, a benefit will be payable.
  • Recurring disability benefit. If the insured member is suffering from a relapse of a disability that the member has obtained the benefit payments for upon returning to work, the waiting period will be waived.
  • Rehabilitation assistance. All the rehabilitation costs that incur during the period of your illness or injury may be reimbursed.
  • Interim cover. Automatic accident cover for when the member's application has not been yet approved and/or was being underwritten.
  • Guaranteed renewable cover. The policy will be renewed each year, as long as the premium payments are met and no further medical exam is necessary, regardless of the changes in health.
  • Worldwide, 24/7 cover. Cover will be provided all year round, no matter where you are. Depending on your employer's agreement with the insurance provider, you may also apply for group life insurance and/or group TPD cover if they are on offer.

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8 Responses

  1. Default Gravatar
    karimMay 24, 2018

    Hi,
    I have been out of work since January 2017 due to mental illness i.e. depression. I have been on centrelink benefits since Feb 2017. I just found out that my AMP super policy has the monthly temporary salary continuance cover with benefit period of 2 years. Can I still put forward a claim now for the past 16 months? I have been unemployed due to my illness condition.

    • Avatarfinder Customer Care
      JeniMay 24, 2018Staff

      Hi Karim,

      Thank you for getting in touch with finder.

      As a friendly reminder, while we do not represent any company we feature on our pages, we can offer you general advice.

      Regarding your enquiry, as per AMP, while you generally cannot take your super until retirement, there are some specific circumstances where the law allows you to draw on your super early.

      These conditions can be summarised as:

      -Compassionate grounds
      -Terminal medical condition
      -Permanent incapacity
      -Severe financial hardship
      -Termination of employment where preserved benefits are less than $200.

      You can refer on this link.

      You need to check that you fit into which condition (i.e. terminal illness or permanent incapacity). You will also need to call them at 131 267. Their operating hours are from Monday to Friday, 8:30 am to 7:00 pm. They will check whether you fulfills all the terms and conditions or not.

      I hope this helps.

      Have a great day!

      Cheers,
      Jeni

  2. Default Gravatar
    BrendanMay 12, 2017

    G day, I receive payment from DVA and a part pension from Com super after medically discharging from the Army. I worked after getting out of the army, but have now been off work for about 3 years due to my illness. Can i now claim salary continuance through my Super? (I Didn’t think of it before). Cheers.

    • Avatarfinder Customer Care
      ZubairMay 12, 2017Staff

      Hi Brendan,

      Thank you for your question.

      finder.com.au is a comparison and information service and we are not permitted to provide our users with personalised financial advice.

      For clarification on whether you are eligible to receive a claim, please refer to your product disclosure statement or contact your super fund.

      Cheers,
      Zubair

  3. Default Gravatar
    GrantMarch 23, 2017

    I suffered a shoulder injury that had me off work for a month. I was eventually cleared to come back to work by my GP who simply asked will you be able to do your job ?
    Five months later my shoulder is not recovering fully and I have been advised I will need corrective surgery and unable to work for 6 months.
    will I be covered by salary continuance ?
    I will be unable to dress myself or use that arm for at least 5/6 months or longer

    • Avatarfinder Customer Care
      ZubairMarch 27, 2017Staff

      Hi Grant,

      Thank you for your question.

      finder.com.au is a comparison and information service and we are not permitted to provide our users with personalised financial advice or product recommendations.

      For clarification on whether you are eligible to receive a claim, please refer to your product disclosure statement or contact your insurer.

      All the best,
      Zubair

  4. Default Gravatar
    MarkDecember 19, 2016

    I have two superannuation so can I claim salary continuance from both policies?

    • Avatarfinder Customer Care
      MauriceDecember 21, 2016Staff

      Hi Mark,

      Thanks for your question. Most insurers will reduce your claim if you have payment from another source e.g. a second insurer. You might find this page helpful: https://www.finder.com.au/multiple-income-protection

      I hope this helps,

      Maurice

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