Salary Continuance Insurance

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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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:

Debt repayments

Medical Costs

Home Modifications

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:

  1. How long you can afford to go without receiving a salary
  2. How much sick leave, annual leave, personal leave or long service leave you have available
  3. The financial impact on you and your family of not receiving an income while you are off work
  4. Affordability as the longer the benefit period the more expensive the cover
  5. Your occupation (especially if it is deemed risky)
  6. 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:

Payment of premiums from your super fund can erode your retirement savings

Certain additional built-in features may not be available

You will only receive your benefit if you satisfy your life insurance policy’s total disablement definition as well as your super trust deed rule and meet the superannuation condition of release.

Agreed value policies types may not be available with only indemnity policies being available.

Limited maximum benefit period available

It may take longer to receive your benefit from your super fund

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%.

Split IP

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.

Superannuation Booster

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.

Published: April 21, 2015

Ask an Expert?


  • Tim |

    Do you have to use up all your sick leave and long service entitlement before you can access your salary continuance insurance?

    IE if your stated waiting period is only 30 days and you have 200 days sick leave, can you start claiming the 75% salary continuance immediately that the 30 day period from being absence from work?

      Brett Lenertz |

      Thanks for your question Tim and to answer this, it may depend on the type of salary continuance cover that you have. For example, is it issued as part of an Employer issued policy through your Superannuation (often referred as Group Insurance) or did you take out the policy yourself independently? If it was the first option that I mentioned, then their may be a stipulation that all sick leave and/or long service leave is used up before you can access the benefits within the policy. This would likely be stipulated in the PDS issued by the Insurer for this policy. The second option that I mentioned which may be an Income Protection Policy would generally mean you could access the benefits if your claim was approved after the waiting period even though you may have a ‘bank’ of sick leave entitlement sitting there. Unless the Life Insurer asked specific questions during the application process around accumulated sick leave or they asked you how long your income would continue for in the event of a disability, then the insured person may wish to just use their sick leave during the 30-Day Waiting Period only for example and keep excess sick leave for another time potentially? You would have to check what was asked during your application process under the Duty of Disclosure in this instance. This is general information Tim, and keep in mind that all Life Insurers are different and they can all have different procedures in assessing the potential to claim for the insured person, so it may be best that you check with the Life Company that issues your policy.

  • Julius Busch |

    What would be an example of a Total Disablement definition for a Salary Continuance policy?

      Brett Lenertz |

      Hi Julius, Thanks for your question. Basically, Total Disablement can be a sickness or an injury where solely the Life Insured is not working in gainful employment and is unable to perform one or more of their important income producing duties of their usual occupation. During this time they must also be under the regular care of a medical practitioner and following their advice. It is important to add that as Salary Continuance cover is held inside Superannuation, you must meet a ‘condition of release’ from the Super Fund to receive those benefits.

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