Salary Continuance Insurance is income protection that is held within your super fund. It protects your income if you are unable to work due to a sickness or accident.
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- Cover up to 75% of Your Income
- Tax Deductible Premiums
- Flexible Waiting and Benefit Periods
- Multiple Policy Options Available
What is Salary Continuance?
A Salary Continuance Insurance policy allows you to receive up to 75% of your salary if you are totally disabled and unable to work due to a sickness or accident.
It comes with a number of benefit and waiting period options, however generally the maximum benefit period available is two years.
As the cover is held within your super fund the super fund becomes the policy owner and any benefit will be paid directly into your fund. A condition of release will need to be met in order for you to access the monthly benefit.
Salary Continuance Insurance can help to cover:
Providing an income
Salary Continuance Benefit Periods
Insurers will generally offer a number of benefit period options however it may be restricted to a maximum of two years, depending on the type of Salary Continuance policy you have and your super fund.
In order to make your decision on your benefit period you will need to consider:
- How long you can afford to go without receiving a salary
- How much sick leave, annual leave, personal leave or long service leave you have available
- The financial impact on you and your family of not receiving an income while you are off work
- Affordability as the longer the benefit period the more expensive the cover
- Your occupation (especially if it is deemed risky)
- Any pre-existing conditions you have or past times you participate in which could impact on your likelihood of suffering from a total disability
Salary Continuance Waiting Periods
You will need to choose a waiting period which is the period you are required to wait before you can start accruing your benefit. Your waiting period options for Salary Continuance may be restricted compared to options available for income protection held outside of super.
You will need to consider:
- How long you can afford to wait before you start receiving your benefit
- Any sick leave, annual leave, personal leave or long service leave you have
- Affordability as the shorter the waiting period the more expensive the cover
- Your ongoing financial obligations
Advantages of Salary Continuance
There are a number of advantages to holding income protection insurance inside your super fund:
Premiums are paid for by your fund, reducing the impact on your cash flow
A number of Salary Continuance products may avoid loadings for pre-existing conditions
Medical underwriting may not be required
Premiums may be more affordable due to group rate discounts
Disadvantages of salary continuance
Before you decide on taking out a salary continuance insurance policy, you should consider the disadvantages that may arise:
Other things to note:
Receiving the benefit
As Salary Continuance is held within your super fund, the benefit will be paid to your fund. To access the benefit, you will need to meet a condition of release. If this is met, your benefit will be paid to you. If it is not met, your benefit will be retained with your fund until such a condition is met.
Tax Treatment of Salary Continuance
Salary Continuance benefits will generally be taxed at your marginal rate of tax.
While income protection held outside of super is tax deductible to the individual, Salary Continuance is only tax deductible to the fund.
Also, while income protection held outside of super is fully tax deductible to the individual according to their marginal tax rate, salary continuance may only be tax deductible up to 15%.
Some insurers are now offering ‘Split Income Protection’, where you can split your Income Protection ownership between self owned and superannuation ownership. This allows you to take advantage of the savings by having your super fund pay your premiums but also maintaining access to benefits that are not available within super.
You may have the option of covering an additional 5-10% of your income to go towards your superannuation, so it can keep receiving payments.