Salary continuance insurance pays you a monthly benefit, usually up to 75% of your salary, if illness or injury stops you from working. It is held inside your super fund, so the premiums come out of your super balance rather than your bank account. Many Australians already have some level of this cover without realising it — it often comes automatically with a super account or as part of an employer’s benefits package. MoneySmart, the federal government’s money advice service, has a plain-English guide to income protection insurance that is worth reading alongside this article.
What is salary continuance insurance?
Salary continuance insurance is income protection cover that is held specifically inside a super fund. If you become too sick or injured to work, the policy pays you a monthly benefit to help you cover the mortgage, rent, groceries and bills while you recover.
Two things make it different from most insurance you buy directly:
- Premiums come out of your super balance. You do not pay the insurer directly, which is easier on your weekly budget — but it does chip away at your retirement savings.
- Claim payments go through your super fund. When you claim, the insurer pays the benefit to your super fund first, and the fund then releases the money to you once you meet the conditions of release for temporary incapacity.
Cover is usually sold as a group policy — your super fund or employer buys one policy that covers a large group of members. Because of that bulk buying, premiums tend to be cheaper than a policy you buy on your own, and many funds accept you automatically without a health check.
How salary continuance works: the three moving parts
Every policy comes down to three numbers. Understand these and you understand your cover.
1. The waiting period
This is the time you must be unable to work before payments start. Group salary continuance policies most commonly offer 30, 60 or 90 days. The waiting period usually starts on the day a doctor examines you and certifies that you are unable to work.
During the waiting period you get no payments, which is why your sick leave matters — many people use accrued sick leave to bridge the gap. Choosing a longer waiting period lowers the premium, because the insurer is on the hook for less.
2. The benefit amount
Most policies pay up to 75% of your pre-disability salary, paid monthly in arrears (at the end of each month, for the month just passed). Some super funds add a top-up of up to 10% of your salary paid as a super contribution, so you can receive up to 85% in total — but the total can never exceed 100% of your income.
If you are partially disabled — meaning you can do some work but earn less than before — the policy may pay a reduced amount proportional to your lost income, depending on the terms.
3. The benefit period
This is the maximum length of time payments can continue for one claim. For salary continuance inside super, it is usually two years. Some policies offer five years or cover up to age 60 or 65, but the shorter the period, the cheaper the premium — and two years is by far the most common on group policies.
Payments can also stop before the benefit period ends if you recover or return to work, if you are no longer under a doctor’s care, if you reach the policy’s expiry age (usually 60 or 65), or if you pass away.
A quick dollar example
Say you earn $90,000 a year. That is $7,500 a month. At 75%, your salary continuance benefit would be up to $5,625 a month. If your fund includes the 10% super top-up, another $750 goes into your super each month while you are claiming, keeping your retirement savings growing while you cannot work.
That is well short of your full pay, but it is usually enough to keep the bills paid. Keep in mind that other income can reduce your payment: most policies have offset clauses, so workers compensation payments, continued sick leave or other disability benefits may be subtracted from what the insurer pays.
Who typically has salary continuance cover?
There are two main ways people end up with this insurance:
- Through your super fund. Many super funds include a default level of income protection-style cover for eligible members. You may have to be a certain age, have a minimum balance (for example $6,000) and have received an employer contribution before automatic cover kicks in. Check your fund — if you never opted out, you might already be covered.
- Through your employer. Some employers buy group salary continuance as part of their benefits package. The employer may pay all of the premium, part of it, or pass the cost on through your super. It is provided at no extra cost to you in many workplaces.
If you are self-employed or your fund does not offer it, you can usually apply to add cover through your super fund — you will just need to provide some health information for the insurer to consider.
Salary continuance vs income protection: what is the difference?
People often use the two terms interchangeably, and in a sense salary continuance is income protection — it is just the name used when the cover sits inside super. The real comparison is between cover inside super and a standalone income protection policy bought directly. Here is how they stack up:
| Salary continuance (inside super) | Income protection (direct) | |
|---|---|---|
| Who pays the premium | Your super balance | You, from your bank account |
| Typical benefit period | 2 years (some to age 60/65) | Up to 2 or 5 years, or to age 65 or 70 |
| Tax deductibility | Not deductible for you (deductible for the fund) | Usually deductible for you |
| Cost | Cheaper — bought in bulk | More expensive, tailored to you |
| Health checks | Often automatic acceptance, no health check | Full underwriting usually required |
| Flexibility | Limited — group terms | Choose waiting period, extras, rehab benefits |
| Cover when you change jobs | May stop if you change funds | Stays with you |
Some people hold both at once — this is sometimes called split income protection. You cannot double up on benefits, though: offset clauses mean the total across all your policies is capped at around 75% of your salary.
The pros and cons
Pros
- Affordable. Group pricing makes premiums cheaper than a standalone policy, and they come out of your super so your weekly cash flow is untouched.
- Easy to get. Many funds offer automatic acceptance with no medical questionnaire, which also means pre-existing conditions may be covered where a direct policy would exclude them.
- Good first safety net. For young workers or anyone with little sick leave saved up, it fills the gap between your sick leave running out and a long recovery.
Cons
- Eats into your retirement. Every dollar of premium comes out of your super balance, so decades of premiums can meaningfully reduce what you retire with.
- Short benefit periods. Two years sounds long until you are facing a serious illness. A direct policy can cover you through to retirement age.
- You can lose it without noticing. If you change super funds, stop receiving contributions, or your balance drops, your cover can lapse — and you could be left uninsured.
- Payments can be slow. Because benefits travel from the insurer to your super fund and then to you, there can be extra delays compared with a direct payment.
- Not tax-deductible for you. Unlike direct income protection premiums, salary continuance premiums cannot be claimed on your tax return.
How to check whether you are covered (a five-minute check)
- Log in to your super account. Look for a section called “Insurance” or “My cover”. It will show your cover type, the monthly benefit amount, waiting period and benefit period.
- Read your annual statement. Your fund’s yearly statement lists your insurance cover and what you paid in premiums.
- Check with your employer. Ask HR or payroll whether the company provides group salary continuance and who the insurer is.
- Read the PDS. The Product Disclosure Statement spells out exactly what is covered, the exclusions and how to claim. MoneySmart recommends reading it before you need it, not after.
How a salary continuance claim works
- Notify your fund as soon as you stop working. Claims have time limits, so do not wait until the waiting period is over to start the paperwork.
- Get medical evidence. Your doctor needs to certify that you are totally (or partially) disabled and record the date this began — the waiting period is measured from that date.
- Fill in the claim forms. You will need to provide personal details, your financial situation and medical information. The fund passes these to the insurer.
- Serve out the waiting period. For a 90-day waiting period, no payments flow for the first three months of disability.
- Receive monthly payments. If the claim is accepted, benefits are paid monthly in arrears — via your super fund to you — for as long as you remain eligible, up to the benefit period.
- Stay under medical care. You will need to keep seeing your doctor and follow their treatment plan; refusing treatment or skipping medical reviews can have payments suspended or stopped.
What salary continuance does not cover
- Redundancy or unemployment. This is the biggest misconception. Salary continuance only pays if you cannot work because of illness or injury — it does not cover you if you lose your job. Some direct income protection policies offer limited redundancy add-ons, but these are not part of salary continuance.
- Self-inflicted injury or illegal acts. Standard exclusions include intentional self-harm and injuries from illegal activity. Some policies also exclude high-risk activities like extreme sports.
- Normal pregnancy and childbirth. Some providers exclude uncomplicated pregnancy and childbirth claims.
- Anything above the offsets. Workers compensation, sick leave and other benefit payments usually reduce what the insurer pays, dollar for dollar in many cases.
Tax treatment
Salary continuance premiums paid out of your super are not tax-deductible for you as an individual. The super fund can claim the deduction. When you receive benefit payments, they are generally taxed as ordinary income, the same as wages. This is one of the trade-offs compared with direct income protection, where you pay the premium yourself but can usually claim it as a tax deduction.
Frequently asked questions
Can I have salary continuance cover with more than one fund?
Technically yes, but you cannot double up on the payout. Offset clauses across policies cap your total benefits at roughly 75% of your salary, so a second policy usually just adds premium cost for no extra benefit.
What happens to my cover if I leave my job?
It depends on the arrangement. If the cover came through your super fund, it may continue as long as you keep the fund and meet the balance and contribution requirements. If it was employer group cover tied to your employment, you may have a short window (often around 60 days) to convert to an individual arrangement — at higher premiums — or the cover stops.
Is salary continuance worth it?
For most employees it is a sensible, low-cost safety net — especially since you may already have it and barely notice the premiums. The two-year benefit period is the main limitation. If your family depends entirely on your income and you have a mortgage, it is worth checking whether your cover amount is actually enough, and whether a longer benefit period or additional direct cover makes sense for you.
This article is general information only and is not personal financial advice. Insurance needs differ from person to person — read the Product Disclosure Statement and consider speaking with a licensed financial adviser before making decisions about your cover.
