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Understanding Personal Accident Insurance - what it covers and how it works

Why might you need Personal Accident insurance?

Have you thought about what would happen if you were unable to work due to an injury or sickness? Although you must face this possibility when working or running a business, the financial stress that can come with an unexpected injury or sickness may be eased with the right type of insurance. Personal Accident insurance is designed to help relieve financial pressure if you were to suffer an injury from an accident, or a serious illness which prevents you from being able to work or run your business.

Many Australians have been impacted by the cost of living, but as a business owner, sole trader or independent contractor, you’re especially vulnerable to financial strain if you’re unable to work because your business operations and income may cease. To help protect your business and livelihood against unexpected injury or sickness that prevent you from working, you can consider taking out Individual Personal Accident Insurance. It’s an insurance policy designed to enable you to continue to afford to look after yourself and your family whilst you focus on getting better.

Personal Accident insurance can include the option to:

  • Get cover for 24 hours a day / 7 days a week or limit your cover to work hours or outside of work hours only.
  • Add cover for business expenses.
  • Options include cover for accidental death, sickness or injury.
  • Add sums insured for weekly benefits.
  • Adjust the time excess period on the policy.1

In the event of an insured accidental injury, including where you become temporarily or permanently disabled to the extent that you cannot engage in your usual occupation or business duties, Personal Accident policies can help provide a lump sum payment or weekly benefit to help give you the financial support you may need. The lump sum payments under a Personal Accident policy usually pay a fixed amount of money for specified injury or sickness.

Key differences between Personal Accident and Income Protection Insurance

Both personal accident and income protection insurance are intended to help provide financial benefits due to an insured injury or sickness that results in you being unable to work. While it may seem like Personal Accident insurance and Income Protection are very similar policies, there are some differences which are worth understanding.

Differences in cover

Personal Accident insurance may offer the option to include a death component in addition to various other types of insured injuries, while Income Protection on the other hand is intended purely for loss of income because of an insured injury or sickness.  Personal Accident cover is usually a generic policy with standard levels of cover available, whereas Income Protection may offer more flexibility and options under the benefits of the policy, and may include a broader definition of sickness and benefits payable.

A Personal Accident policy will only cover you for accidental bodily injury or a sickness up to an agreed benefit period (typically between 2 to 5 years), whereas, an Income Protection policy may offer more flexibility to tailor the benefit period to your needs. As such Income Protection typically may be more expensive than a Personal Accident policy.

Differences in benefit payment

There may also be a difference in how the benefits are typically paid. Income Protection generally covers your lost income in instalments, rather than lump sum payments. For example, it may cover up to a percentage of your usual income in the event of an injury or illness in instalments. Personal Accident insurance policies on the other hand typically provide lump sum payments or weekly payments for insured accidental injuries, as well as lump sum options if you pass away due to the covered injury in question.

Difference in how to get insured

Another difference between the Personal Accident and Income Protection is how they are issued. Personal Accident policies are underwritten by general insurance companies and are mostly available through insurance brokers or direct purchases. Income protection on the other hand is usually underwritten by life insurance companies.

Difference in cost

Generally, Income Protection policies provide broader coverage and so is expected to be more expensive when compared to a Personal Accident policy with similar sums insured under the weekly benefit or income protection coverage.

Do I need both Personal Accident and Income Protection?

Because both policies cover similar events, it is unlikely you would need to take out both. What’s more, if you did happen to suffer an injury or sickness, it is unlikely you would be able to claim on both policies, as many insurance policies may not cover you for an event if you have already claimed under another policy. That’s why it’s important to ensure you take the time to understand the difference between Income Protection and Personal Accident insurance, and make a decision based on your individual circumstances.

How is Personal Accident different from Workers’ Compensation?

While Personal Accident insurance is designed to protect business owners, sole traders and self-employed professionals, Workers’ Compensation is intended to protect your employees. Typically Workers’ Compensation only covers claims involving employees’ work-related injuries whereas Personal Accident policies can include the option to extend the policy beyond your working hours.

It’s important to understand that Workers’ Compensation may not cover you as a business owner (although there are some exceptions) and is not required if you do not have any employees. Under Australian law, employers must have insurance to cover their workers in case they get sick or injured because of work.² Workers’ Compensation is a type of insurance that meets these legal requirements.

Everyone’s individual needs and personal circumstances are different, and that’s why it’s important to get the right insurance policy to suit your business needs. If you would like to know more about Personal Accident Insurance, you can contact our insurance specialist team on 1300 836 028

1Time excess period means the period of time following an Event giving rise to a claim for which no benefits are payable
2 Work Safe Australia, Workers’ Compensation,
 Subject to the policy terms, conditions and exclusions.

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