Salary Continuance Insurance

Salary continuance insurance is the terminology used when income protection insurance is held within a superannuation fund rather than as a standalone personal policy. The coverage itself is functionally identical to income protection insurance - providing regular monthly payments to replace lost income during periods of illness or injury-related incapacity. The key distinction lies in the funding source and tax treatment: salary continuance premiums are deducted from your superannuation balance rather than paid from your after-tax income, and benefits paid are generally taxable. For members under preservation age (currently 60), salary continuance benefits from super are taxed at marginal rates, while those over preservation age may receive tax-free components. Many Australian superannuation funds include default salary continuance coverage, automatically providing members with basic income protection (often 75% of salary for up to 2 years after a 90-day waiting period). The insurance is underwritten by life insurance companies but administered through the super fund structure. Salary continuance premiums are not personally tax-deductible (unlike standalone income protection) because they're paid from pre-tax super contributions. However, the super fund itself may claim tax deductions, resulting in lower net premiums. Members can typically upgrade coverage, reduce waiting periods, extend benefit periods, or increase sum insured through their super fund, subject to underwriting. The main advantage is the apparent cost saving through super, while disadvantages include reduced flexibility, potential tax on benefits, and erosion of retirement savings through premium deductions.