Salary continuance insurance is income protection insurance held within superannuation. It provides monthly income replacement if you can't work due to illness or injury, with premiums paid from your super balance. The terms are generally identical to income protection, but with different tax treatment.
Salary continuance insurance is the term used when income protection is held within a superannuation fund rather than as a standalone personal policy. The coverage itself is functionally identical to income protection.
Both provide regular monthly payments to replace lost income during periods of illness or injury-related incapacity.
The key distinctions are funding and tax treatment:
Many Australian superannuation funds include default salary continuance coverage, automatically providing members with basic income protection. A typical default profile is:
The insurance is underwritten by life insurance companies but administered through the super fund structure. The super fund itself may claim tax deductions, resulting in lower net premiums.
Members can typically request changes through their super fund, subject to underwriting:
The main advantage is the apparent cost saving through super and convenience of automatic enrolment.
Disadvantages include:
Mark, 42, receives $5,000 monthly from his super fund's salary continuance after being unable to work for 6 months following surgery, with payments taxed at his marginal rate
Sarah, 35, automatically has salary continuance through her industry super fund providing 70% income replacement for up to 2 years after a 90-day waiting period, without having actively chosen the cover
Tom, 62, claims on his salary continuance insurance through super, receiving $7,000 monthly. As he is over 60, superannuation benefits including insurance payouts are generally tax-free (consult a tax adviser as individual circumstances vary)
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