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Employment does not always guarantee that you will continue to receive income. You can lose your income due to an illness, retirement or an unforeseen emergency. Salary continuance insurance is a type of insurance that guarantees you will receive all or a large portion of your salary after experiencing one of these events. Employers sometimes offer salary continuance insurance as part of a benefit package, or you can purchase this type of insurance from many insurance companies.
Filing a Claim
The specifics of a salary continuance insurance policy will vary depending on the terms of your individual insurance policy. According to “The Future of Disability in America,” the average payoff for salary continuance policies is approximately 75 percent of you annual salary, paid monthly. Some policies offer a 100 percent benefit. However, these policies typically carry much higher premiums and specific conditions you must meet to qualify for any policy benefit. Additionally, the length of time your policy will cover you after you file a claim may vary considerably from policy to policy. Depending on your disability or emergency and the specific terms of your policy, you might not continue to receive payment under the policy for the full recovery or absence from your job.
When you accept a salary continuation policy through your employer, your employer may require you to sign an agreement in exchange for receiving the policy. This type of continuation plan guarantees the employee will receive full coverage during the duration of the agreement. For example, many employers use this type of agreement to retain an employee after retirement by establishing an agreement that the employee will not compete with the employer until the agreement ends.
How Employers Use Salary Continuance
In order to minimize the time and money employers will have to pay in the event of a claim, employers put exclusionary clauses in the insurance agreement covering different circumstances. For example, employers may not want to continue to pay the premiums on a policy if an employee no longer produces effectively for the company. Some plans will give the employee the option of cashing out sick days before or after receiving payment under the policy. On the other hand, other plans may mandate that the employee cash out sick days prior to receiving payment under the policy.
Understanding Your Policy
Salary continuance insurance policies often include terminology that is difficult to understand. Regardless of whether you purchase your own policy or receive a policy from your employer, you should find out the specifics of your coverage and any exclusions. Specifically, you should understand the length of disability coverage under the policy and the type of disabilities covered by the policy.
- Consumer Reports: When Illness or Injury Strikes; June 2007
- "Health Insurance Resources: A Guide for People with Chronic Disease and Disability"; M.S.W. Dorothy E. Northrop A.C.S.W. and Stephen E. Cooper; 2006
- "The Future of Disability in America"; Committee on Disability in America, Marilyn J. Field and Alan Jette; 2007
Brian Bass has written about accountancy-related topics and accounting trends for "Account Today." He works as a senior auditor specializing in manufacturing and financial services companies for one of the Big 5 accounting firms. Bass hold a master's degree in accounting from the University of Utah.