Salary continuance insurance provides you with cover against the loss of income if you are not able to continue to work.

What does salary continuance insurance involve?

This type of insurance that offers you cover in the event of an injury or illness in case you are not able to work. Salary continuance insurance is purchased with a super fund; therefore, your insurance premiums will be paid using the super balance and not from your bank account directly. If you make a claim, your benefits will be deposited into your super fund prior to being released to you.

Several employers provide group salary continuance insurance to employees. The insurance is not tax-deductible and is payable for two years only, compared to other income protection.

What cover does salary continuance insurance provide? 

Some of the injuries and accidents the cover provides include:

  • Full permanent disability. The policy pays out 100% of the total monthly benefit for the benefit period (normally two years) if you become permanently disabled.
  • Partial disability. It means you are in a position to do some work; however, you can’t earn as much as you used to due to the disability. In such a case, you will only be paid a percentage of the monthly benefit. The actual amount depends on the situation and how much less you are actually earning. This cover allows you to continue claiming partial disability for the full benefit period till you are no longer partially disabled.
  • Death. In case you pass away when claiming salary continuation benefits, the policy may pay several months of benefits in total to your estate through a superannuation fund.
  • Recurring disability. In case you suffer a recurrence of the same disability which allowed you to get a previous claim, it will be considered the same injury, and thus there won’t be a waiting period.
  • Specific injuries. Suppose you suffer from one of the specific injuries indicated in your policy and continue suffering from the same injury after the waiting period ends. In that case, you might receive payments depending on what kind of injury it is. For example, the salary continuance benefit may pay full 3 months benefit in case you suffer from a fractured pelvis, 24 months benefit for complete blindness or 60 months benefit if you lose your multiple limbs.

Salary continuance insurance – what you ought to know 

Salary continuance types 

  • Permanent. The policy will pay 100% of the total monthly for the full benefit period in case of total and permanent disability. This is where you are not able to work and have no signs of recovery.
  • Temporary.  The cover will only pay benefits for a specified period, unlike income protection which stops at age 65. The benefit period is the maximum amount of time the policy can payout. It is usually two years after the end of the waiting period; however, it may differ depending on the policy.

As a customer, you have the option of choosing whether you need to purchase several types of insurance under one single policy or standalone policies. In case you opt for standalone policies, you need to inform the insurer that you have multiple active life insurance policies.

Selecting a waiting period

Most policies allow you to choose a waiting period of 30, 60 or 90 days. This is the period you need to wait from the moment you fall ill or incur an injury to the point when you begin to receive salary insurance benefits. During this time, you have to rely on sick leave pay or your savings to cover your expenditures.  

Note: It might take longer than your chosen waiting period to receive your claim benefits. For this case, you will receive benefits in arrears from the end date of your waiting period.

Determining a benefit period

A benefit period is the time frame you’ll receive payment for when you make a claim. 2 years is the standard benefit for most salary continuance benefits. That is, you can receive payment in 24 months normally, 75% of your income. Unfortunately, this payment will stop even if you are still unable to work at the end of the benefit period. You can also opt for a longer benefit period if you choose to pay a higher insurance premium.

Note: If you are aged 60 or 65, most salary continuance insurance providers won’t payout.

Salary continuance insurance breakdown on cost

Some of the factors that affect salary continuance insurance comprise of:

  • Gender
  • Age  
  • Profession
  • Period of waiting
  • Cover amount
  • Benefit period

The premiums are taken out of your superannuation balance and not from your account of bank. This shows it will lessen the amount you have in your supper for retirement.

To help you understand how much it is going to cost you, we’ve gathered quotes from 2 Australian salary continuance insurers. Costs are founded on a two year benefit period and a waiting period of 60 days. Quotes are subject to change as they were taken in August 2021.

InsurerMale or Female25 to 29Male or Female30 to 39Male or Female40 to 49Male or Female50 to 59Male or Female60 to 65
Australian Super$3.15$6.33$10.47$13.71$17.74
Aspect$24.84$26.49$38.98$77.85$159.73
Average cost$14.01$16.14$24.72$45.78$88.73

Group salary continuance insurance

Group salary continuance insurance offers similar benefits to salary continuance insurance. If you cannot work because of an ailment or injury, you can receive a monthly benefit of up to 75% of your income.

As an individual, you can receive group salary continuance insurance if your employer provides it as a benefit to your employment or you are a member of group income protection. 

Benefits 

  • Lower premiums. This policy is bought at wholesale price. it shows you will be paying little than individual polices.
  • Easy to apply. The insurance provider requires a minimal level of administration.
  • Automatic acceptance. A medical examination isn’t required.  
  • Smokers can get cover. Just like non-smokers, smokers can get cover at affordable premiums.
  • Premiums are deducted from super contributions. Members of superfund can pay premiums through deduction from their superannuation account instead of paying from their bank account.
  • More cover than WorkCover.  A more comprehensive cover is provided by Group cover in comparison to health insurance and WorkCover.  

Drawbacks 

Several additional options and benefits are not provided. Compared to individual policies, it can be less comprehensive.

  • Many group salary continuance insurance providers do not provide agreed value policies. This is an indication that there could be a gap between what is provided and what is expected/ needed.
  • It is not transferable. In case you move to a new super fund or change jobs, it might be impossible to take advantage of your employer’s group policy.
  • Your cover might be made void without your knowledge. Your cover might become void if your employer does not deposit payments on time on your super fund.
  • Retirement savings will diminish as time goes by. This is due to the deductions made on your superannuation account.
  • More extended processing after making a claim. This leads to delays in receiving the benefits.
  • No tax deductions. It is not possible to claim your group policy premium payment through your super fund as a tax-deductible. 

Salary continuance insurance pros and cons

Pros

  • If you have just entered the workforce, it is convenient.
  • Your everyday cash flow is not affected as premiums are paid from the super fund.
  • To receive cover, you don’t have to go for a health check.
  • It is cheap as policies are purchased in bulk by the employer.

Cons 

Many companies allocate a two year benefit period, which is not adequate to cover your recovery period.

  • The premiums are not tax-deductible.
  • Premiums are paid through your super fund. This will reduce retirement savings but won’t affect your daily cash flow.
  • Your retirement savings will be reduced as premiums are paid through your super fund.
  • In case you are covered under salary continuance group policy, your cover will stop when you leave your job.
  • Delay in getting payouts as benefits are deposited into your super before you get paid.  
  • In case your super falls below $6000, your super contribution stops, or your insurance might stop too if you change funds.
  • If you don’t have a nominated beneficiary, claiming can be complicated.

Is it possible to obtain several salary continuance insurance policies? 

Yes. For instance, it is possible to purchase more than one salary continuance insurance policy having several income protection policies. But this is not an indication that you will get higher benefits each month.

Why not? Your monthly benefit will always be capped at 75% irrespective of the number of continuance insurance policies you take out. This is to make sure that you have an incentive if you want to return to work when you have fully recovered.

Did you know?

Individuals normally go for multiple salary continuance policies to cover them in case the recovery time is longer. As a policyholder, you can choose your waiting period to function to your advantage as many insurers provide benefits for a maximum of two years.

It is common to:

  1. Purchase a policy to cover the immediate first two years of injury or illness.
  2. Combine the policy with another policy that specifies a two year waiting period.

Crucial note: Be ready to pay more than one premium each month, and you must inform both insurers that you are taking out two policies.

Salary continuance insurance vs income protection

Both salary continuance insurance and income protection make sure that you won’t lose your monthly income in case an injury or illness makes it impossible to work. Though, the main difference between the two is how you get them.

You can get income protection as an individual or through superannuation fund via group insurance. Conversely, only through your super and via your employer can you get salary continuance insurance.

Understand well: The main difference between income protection and salary continuance insurance is that you normally have more control when you take out individual income protection. As an individual, you don’t have to worry about losing cover when you move jobs, and individual policies will offer you more customization. Unfortunately, it is more expensive, and you have to pay your premiums from your bank account directly rather than your supper.

Comparison on income protection insurance 

BrandMaximum Monthly BenefitMaximum % of Income CoveredMaximum Benefit PeriodMultiple Waiting PeriodsApply
AAMI  Income Protection Compare $10,000 75% 5 years✓ Receive quote More details

Save 5% as an existing AAMI customer. For new customers, if you pay annually, get one month free.

NobleOak Income protection 

NobleOak Compare $25,000 75% Up to age 65✓ Finder Award Receive quote More details

If you apply for NobleOak Income Protection before 30 September 2021, you get your first month free. T&Cs apply.

Insuraceline Income Protection

Insuranceline Compare $10,000 75% 5 years✓ Receive quote More details

After two months, get a $100 bonus. In addition, get a free month if you pay annually. T&Cs apply.

Suncorp Income Protection 

Suncorp Compare $10,000 75% 5 years✓ Receive quote More details

Become a member of Suncorp benefits if you sign up. Save up to 15% from major retailers. Receive a 5% discount as an existing member.

Commbank Income Protection by AIA Australia

Commbank Compare $10,000 75% 2 years✓  More details

In only a few steps acquire income protection online. Get a 5% discount and access to Get access to AIA Vitality Program if you have life insurance and income protection with Commbank and AIA.

RAC Income protection

RACFor the better Compare $10,000 75% 2 years✓  More details

Get cover for up to 75% of your income with RAC, to a limit of $10,000 each month.

RACQ Income Protection

RACFor the better Compare $10,000 75% 2 years✓  More details

You can easily purchase RACQ policy online. Receive access AIA Vitality program and 5% discounts for joint policies.

Other questions you may have about salary continuance insurance

Is it possible to claim several policies?

Yes. However, most income protection policies have clauses that are built-in. This is an indication that you can insure only 75% of your salary. This is to prevent you from claiming more than 100% of your policy after you take policies.

Does tax-deduction apply to salary continuance insurance?

No, premiums are not tax-deductible unlike standalone income protection.

Salary continuance insurance premiums are paid by who?

Normally, you pay the premiums. The premiums are subtracted from your super account. As part of benefits given to employees, several companies will apply for a group salary continuance insurance policy. Other policies might be included as default or as optional extras by superannuation funds. Depending on the situation, different parties may pay premiums.

  • The full amount might be paid by your employer
  • A partial amount might be paid by your employer
  • Premiums might be subtracted from your superannuation contributions
  • Premiums might be subtracted from either your wages or salary

Salary continuous insurance is it underwritten?

No. The insurance is not underwritten. It is among the few ways Australians can access affordable that is free from medical underwriting.

Salary continuance insurance and income protection – what is the difference?

The most significant difference between salary continuance and income protection is that the former is only present through a super fund.

Is redundancy covered by salary continuance insurance? 

No. The insurance only covers you in case you cannot work because of injury or sickness that prevents you from doing your job. Look for redundancy insurance if you want cover for involuntary redundancy.

What is the best waiting period?

Normally, the waiting period is 30, 60 or 90 days. In order to decide the waiting period that works best for you, it is best you do your own calculations to determine how long you depend on your savings and sick pay that you qualify for to sustain yourself. Bear in mind that you will need to pay a higher premium if you choose a shorter period of time.

What period of benefit should I choose? 

Until you turn 65 years, most companies will provide a salary continuance benefit for 2 or 5 years. To determine the appropriate benefit period it is best to weigh the premiums’ cost with your general expenses.

How much does it cost to have salary continuance insurance? 

This will be determined by your gender, age, how much cover you are looking for and your occupation. In case your work environment is high-risk, or you are at higher risk of illness injury, you might be required to pay a higher premium.  

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