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Personal accident and income protection insurance are designed to replace your income if you're temporarily unfit to work. However, personal accident insurance (sometimes referred to as personal injury insurance) only covers you for accidental injuries, whereas income protection can pay you if you're sick or injured.
What is the difference between personal accident insurance and income protection insurance?
- Only covers accidental injuries
- Comes with a maximum benefit period of 5 years
- Can be cancelled by your insurer
- Covers you for almost all injuries and illnesses
- Can pay you until you turn 65
- Can't be cancelled and will continue to renew so long as you keep paying
Still not sure which is for you? Check out our more detailed break down of differences below.
|Key Differences||Personal Accident Insurance||Income Protection Insurance|
|How does it pay me?||Usually in one lump-sum payment||In monthly instalments, similar to your income|
|When does it pay me?||If you're injured in a common accident. E.g. you suffer a fracture, dislocation, loss of sight||If you become sick or injured and can't work|
|How much does it pay me?||It's typically based on your income from the previous 12 months||Up to 75% of your income|
|What can it cover?||Everyday expenses including groceries, mortgage repayments, school fees and more||Everyday expenses including groceries, mortgage repayments, school fees and more|
|How long can you receive cover for?||5 years||Generally between 2 and 5 years, or up until a specific age. E.g. 65|
|Are the premiums tax deductible?||Only if cover is in the form of income protection insurance||Yes, premiums are usually tax deductible|
|Can the insurer cancel the policy on me?||Yes, but more specifically they can choose not to renew your policy.||No, so long as you keep paying your premiums you'll continue to be covered.|
|What's the application process like?||You generally won't be asked medical questions or tests.||You'll be asked questions about your lifestyle and health including your age, smoking status and pre-existing conditions|
Personal accident and sickness insurance vs income protection
Personal accident and sickness insurance is the same product as personal accident insurance insofar as it can be cancelled by your insurer at any time, usually has a maximum benefit period of 5 years and is offered by general insurance companies. The only difference is that it also covers you for some illnesses — though not all — which will be outlined in the insurer's product disclosure statement (PDS).
Income protection insurance, on the other hand, is only available from life insurance companies and protects you if you're unable to work for a specified period due to almost any illness or injury.
Because personal accident and sickness insurance only covers you for specific accidents and some illnesses, it is generally cheaper than income protection, which is far more wide-ranging.
Get an income protection or personal accident quote
Our tables can't show you prices because your premiums are based on your specific circumstances. If you're ready to get an income protection or personal accident quote, compare from our list of providers and click through for your personalised quote. If you'd like to know more about the differences in cost, we've put together a table outlining the costs at different ages. The quote is based on a non smoking, female graphic designer.
Pros and cons of personal injury and income protection insurance
Here's a summary of the pros and cons of both personal accident and income protection insurance to help you decide which one is right for you.
Personal accident and sickness insurance
- It's usually cheaper than income protection
- You don't usually have to answer any medical questions or tests so is ideal if you don't qualify for income protection insurance because of your medical history
- It can pay you 100% of your income
- You might not have to serve a waiting period
- It only covers you for accidental injuries (unless you pay extra to have some illnesses included)
- The insurer can decide not to renew your policy, leaving you without cover and potentially forcing you to lose out on cheaper premiums because of your age
- Even if you're still unable to work, the maximum amount of time you can be paid for is 5 years.
- In some cases, not all injuries are covered, so read the product disclosure statement (PDS) before you buy
Income protection insurance
- It covers you for most injuries and illnesses
- Helps you continue to pay everyday expenses by paying you a monthly benefit worth up to 75% of your current income
- You can take advantage of level premiums (they won't go up each year you hold the policy) while you're young and healthy
- Your cover will be renewed so long as you keep paying your premiums
- You can choose your benefit period (the shorter you choose, the cheaper your premiums will be)
- You can receive income protection benefits for years, usually up until you turn 65
- You'll be asked questions about your medical history and lifestyle
- Premiums tend to be more expensive if you work in a high-risk job
- There's usually a waiting period you'll have to serve before you can receive monthly benefits. It's usually around 30 days but can be longer.
How do the waiting periods work for personal accident and income protection?
With income protection insurance, there's usually a waiting period before your benefit payments kick in; that is, the time you need to wait between submitting an income protection insurance claim and receiving monthly benefits. This period could be a minimum of 14 days but can be much longer depending on the policy that you've chosen. The longer you're willing to wait, the cheaper your premiums will be.
In the case of personal accident insurance, you can sometimes opt for the benefit payments to begin from the first day of your accident without any waiting period. Other options include:
- 7 days
- 14 days
- 21 days
- 28 days
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