Jeffrey Wade
Salary continuance insurance is a type of insurance that provides financial support in the form of a stream of income if you are unable to work due to injury, sickness, or illness. It is held within a super fund, and the premiums are deducted from your super balance instead of your bank account. The benefit period, which is the maximum length of time that one may continue to receive benefit payments, is typically two or three years, depending on the provider. Salary continuance insurance is worth considering if you want to protect your income and maintain your quality of life while focusing on recovery. However, it is important to note that salary continuance insurance premiums are not tax-deductible, and there may be limitations on the benefit period.
| Characteristics | Values |
|---|---|
| Purpose | To provide financial support in case the policyholder is unable to work due to injury or illness. |
| Availability | Salary Continuance Insurance is typically available through a super fund, while Income Protection Insurance is available outside superannuation through independent insurance providers. |
| Eligibility | Eligibility for Salary Continuance Insurance is tied to membership in a superannuation fund that offers this type of cover. Income Protection Insurance requires an application with an insurance company and may involve a medical examination for higher coverage amounts. |
| Benefits | Both types of insurance provide a source of income if the policyholder cannot work due to health reasons. Salary Continuance Insurance typically pays up to 75% of the regular salary, subject to monetary caps and a maximum benefit period. |
| Waiting Period | Salary Continuance Insurance has a predefined waiting period, typically ranging from 30 to 90 days, before benefit payments start. Income Protection Insurance may offer more flexibility in choosing the waiting period. |
| Premium Payments | Salary Continuance Insurance premiums are paid from the super fund balance, while Income Protection Insurance premiums are paid directly to the insurer and may be tax-deductible. |
| Customisation | Income Protection Insurance is generally more customisable, allowing policyholders to choose waiting periods, payment frequencies, and additional benefits such as rehabilitation and accommodation benefits. |
| Maximum Benefit Period | Salary Continuance Insurance typically has a maximum benefit period of two to three years, after which benefits may stop even if the policyholder is still unable to work. Income Protection Insurance may offer longer benefit periods or the option to continue benefits until a certain age. |
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What You'll Learn
Salary continuance insurance vs. income protection insurance
Salary continuance insurance and income protection insurance are two types of insurance that serve as a financial safety net if you are unable to work due to illness or injury. They are similar in that they both provide a source of income to maintain your quality of life and pay your living expenses while you focus on recovery. However, there are some key differences between the two types of insurance.
One of the main differences is in how you obtain them. Salary continuance insurance is typically available only as part of a group through your superannuation fund or employer. It is often purchased as a bulk insurance policy, which can result in lower premiums compared to income protection insurance. In contrast, income protection insurance is available as an individual policy through an insurance company and is usually customised to meet your specific needs, resulting in higher premiums.
Another difference lies in the application process and eligibility criteria. Salary continuance insurance often includes automatic acceptance within superannuation, while income protection insurance requires a more detailed underwriting process, which may include a medical exam and assessment of your health, medical history, lifestyle, and occupation. Income protection insurance also offers more flexibility in choosing the benefit period, while salary continuance insurance typically has a predefined benefit period that may extend up to the retirement age.
Additionally, income protection insurance provides tax benefits as the premiums are tax-deductible, whereas salary continuance insurance premiums are not. This can be a significant consideration when deciding between the two types of insurance.
It is important to carefully consider your needs and consult a qualified financial adviser before making any decisions regarding insurance. The choice between salary continuance insurance and income protection insurance will depend on your individual circumstances, such as your age, employment status, and financial situation.
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Eligibility and where to buy
Salary continuance insurance is typically only available through a super fund. It is often purchased in bulk for a group of super fund members. Therefore, eligibility for salary continuance insurance is tied to membership in a superannuation fund that offers this type of cover as a member benefit. Usually, salary continuance insurance includes automatic acceptance within superannuation, and a medical exam is generally not required for standard coverage. However, for higher coverage amounts, or if your application falls outside the standard acceptance criteria, additional medical information may be required.
On the other hand, income protection insurance must be applied for directly with an insurance company and is available outside superannuation. Income protection insurance is generally more customisable, and you may be able to choose the waiting period and payment frequency. Features such as rehabilitation benefits, accommodation benefits, and homemaker benefits are often only available in policies outside of superannuation.
Salary continuance insurance is available from providers such as Plum. To be eligible for Plum's salary continuance insurance, you must be a Plum member and meet certain requirements based on your arrangements with your employer. Generally, Plum's salary continuance insurance won't be available to you if you're employed as a seasonal or contact worker.
You can also buy income protection insurance from independent insurance providers such as NobleOak. Most super funds also offer default income protection insurance that is cheaper than buying it directly from an insurer.
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Monthly benefit payments
Salary continuance insurance provides financial support if you're unable to work due to injury or illness. It is typically purchased in bulk for a group of super fund members. The insurance premiums are paid out of the super balance, and benefits are paid into the super fund before being released to the insured.
The monthly benefit payments of salary continuance insurance typically start at the end of a waiting period of 30 to 90 days and can be paid for up to two or three years, depending on the provider. The monthly benefit amount is usually up to 75% of your regular salary, subject to certain monetary caps. This benefit may be reduced by other benefits received or expected from other sources, ensuring that the total benefit does not exceed the monthly benefit entitlement.
The benefit period, or the maximum length of time that benefit payments can be received, is typically two or three years, but some policies may offer longer options, such as five years or until a certain age, like 60 or 65. It is important to note that the benefit payments will stop at the end of the benefit period, even if the insured is still unable to work.
The cost of salary continuance insurance depends on factors such as age, gender, chosen waiting period, benefit period, and coverage amount. Each unit of coverage provides insurance for a specific monthly amount, and premiums are typically deducted from the super account monthly.
In summary, salary continuance insurance provides a monthly benefit payment of up to 75% of the insured's regular salary, subject to certain conditions and caps. The benefit period typically ranges from two to three years but can be longer in some cases. The cost of this insurance depends on various factors, and premiums are usually deducted from the super account monthly.
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Waiting periods
Salary Continuance Insurance (SCI) provides a source of income if you are unable to work due to health reasons. It is typically purchased in bulk for a group of super fund members. The cost of salary continuance insurance varies depending on age, gender, chosen waiting period, benefit period, and coverage amount.
The waiting period is the number of consecutive days an individual is totally or partially disabled before any salary continuance benefit is payable. The waiting period typically starts when a medical practitioner certifies that an individual is totally disabled. During the waiting period, an individual may return to work for a limited number of days, which will be added to the waiting period. No benefits are payable during this time.
The most common waiting periods are between 30 and 90 days, though some policies may offer options outside this range. Shorter waiting periods often come with higher premiums. For example, a salary continuance policy might pay full monthly benefits for three months in the event of a fractured pelvis, 24 months for total blindness, or 60 months for the total loss of multiple limbs.
Income protection insurance generally offers more flexibility in choosing the waiting period, ranging from 14 days to two years. This allows individuals to tailor the coverage to their financial situation and needs. By comparison, salary continuance insurance typically has predefined waiting periods, and less flexibility with waiting periods and coverage options.
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Premium prices
Salary continuance insurance (SCI) is usually purchased in bulk for a group of super fund members. The premiums are paid out of the super balance, which means that in the event of a claim, any benefits will first be paid to the super fund before being released to the policyholder. It is important to note that salary continuance insurance premiums are not tax-deductible for individuals according to the Australian Taxation Office (ATO).
The premium prices for salary continuance insurance are influenced by various factors, including age, gender, chosen waiting period, benefit period, and coverage amount. The waiting period is the time between when an individual becomes unable to work due to illness or injury and when they start receiving benefits. This period typically ranges from 30 to 90 days, with some policies offering longer waiting periods. The benefit period is the maximum length of time an individual can receive benefit payments, which is usually two or three years, depending on the provider. Some policies may offer longer benefit periods, such as five years or until the policyholder reaches a certain age, such as 60 or 65.
The cost of salary continuance insurance is also impacted by the coverage amount. Most salary continuance insurance policies cover up to 70% to 75% of the policyholder's pre-disability monthly salary. However, some policies may include additional coverage for super contributions or other benefits. The premium prices may also vary based on the specific features and inclusions offered by the policy. For example, salary continuance insurance may cover specific injuries or accidents, such as full permanent disability, and may have different requirements for eligibility and compliance.
It is worth noting that salary continuance insurance is often provided as a group benefit by employers, who may pay for it in full or partially. In some cases, the employee may pay for the insurance through deductions from their super balance, which allows them to obtain coverage without impacting their take-home pay. However, these deductions will reduce their savings for retirement. Therefore, it is essential to carefully consider the premium prices, features, and benefits offered by salary continuance insurance before purchasing it.
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Frequently asked questions
Salary continuance insurance (SCI) provides financial support if you're unable to work due to sudden illness or injury. It is held within a super fund, meaning your premiums are deducted from your super balance instead of your bank account.
Salary continuance insurance pays a benefit of up to 75% of your monthly income if you are unable to work due to injury or illness. The benefit period, or the maximum amount of time you can receive benefit payments, is typically two or three years.
One advantage of salary continuance insurance is that it is held within a super fund, so you don't have to pay an insurer directly. However, this also means that any benefits will first be paid to your super fund before being released to you. Another benefit is that salary continuance insurance often includes automatic acceptance without an extensive health assessment. However, one drawback is that premiums for salary continuance insurance are not tax-deductible.
The cost of salary continuance insurance depends on various factors, including your age, gender, occupation, medical history, health factors, income, and employment arrangements.
