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Income protection insurance vs WorkCover

Do I need income protection if I have WorkCover?

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WorkCover and Income Protection are both forms of insurance. While they sound like the same thing but there's a key difference between the two.

Hard hat


Designed to to cover work accidents and illnesses.


Income Protection

Covers incidents inside and out work of that stop you from working.

Comparison table: Income protection vs WorkCover

Income ProtectionWorkers Compensation
What cover does it provide?
  • Provides a replacement income of up to 75% so worker can maintain their way of life if forced to take time off work during illness/injury
  • Compulsory protection to cover employers from work-related claims
Where am I covered?
  • Provides cover both at home and at work, 24/7 and anywhere in the world
  • Provides cover for work-related injuries and illnesses
How long is a benefit paid for?
  • Applicant can choose benefit anywhere up to age 70
  • Benefit period is generally capped at 130 weeks unless the worker is totally incapacitated
How much does it cost?
  • No cost. Cover is provided by employer
Are self-employed workers covered?
  • Yes, cover is available for self-employed workers
  • Generally no

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What are the key features of income protection?

Here are some of the features that aren't included with WorkCover:

  • Rehabilitation cover: The insurer can cover the cost of approved rehabilitation programs or modifications that can help you get back to work.
  • Extended benefit periods: You can choose benefit periods, including some options which can keep paying benefits right up until the age of 70. Depending on your state and the situation, workers compensation benefits might only pay out to age 66 at the latest.
  • Specified injury benefits: If you experience a specific injury as mentioned in the policy, you can get paid out lump sum benefits with income protection insurance.
  • Flexible disability definitions: Workers compensation pays out in specific situations, while you can choose more flexible disability definitions to suit your needs with income protection insurance. For example, you can choose a policy that pays out in the event of inability to work, that pays out if you are unable to perform certain daily tasks, or in the event of either.
  • Wider occupation cover: Homemakers, self-employed individuals and others who might not be able to get protected by Work Cover can still take out income protection insurance policies. The disability definitions, benefit amounts and other features of these policies are also generally adaptable to one’s personal situation.
  • Partner benefits: If your partner needs to take time off work to care for you following an injury or illness, such as to drive you to doctor’s appointments, then some income protection insurance can also pay out benefits for their loss of income as well as yours.
  • Cosmetic or elective surgery benefits: Income protection insurance policies can include a clause which specifically states that they can cover disability following elective or cosmetic surgery, or organ transplants.

What's the disadvantage of just relying on WorkCover?

Compared to income protection insurance, WorkCover has some distinct downsides which can help highlight the differences between the two:

    • No cover outside of work related injury or illness: WorkCover only applies to work related injuries and illnesses. Depending on your location this may or may not also include accidents while commuting to work. Sometimes it’s also not quite as simple to claim.
    • Evidence requirements showing you were injured at work: Workers compensation is a type of insurance, and the insurers might not pay a claim unless it can be shown that an injury or illness was the result of work. Depending on the situation this might be extremely difficult to prove, which can delay or prevent compensation payments.
    • Decreasing benefit payments: Depending on the situation, workers compensation benefit payments can decrease over time. With income protection, the benefit payments will generally remain consistent as long as you are disabled.
    • Limited compensation for death or permanent disability: Benefits paid in the event of workplace death or permanent disability can be limited under Workcover. Income protection policies will sometimes include additional benefits for these by default, and can be bundled with life and TPD insurance for all-in-one cover of a wider range of situations.
    • No cover for injuries resulting from negligence: WorkCover might not pay benefits if an injury or disability was the result of negligence on your part. This might include any failure to follow prescribed instructions, manufacturer specifications or to meet the full safety requirements, regardless of how typical these practises may be in your workplace.

When will I be eligible for a WorkCover payment?

Any employee who suffers a serious injury that does not allow them to work a period some time is eligible to receive worker’s compensation from their employer. However, there are certain factors that affect whether or not the WorkCover will be paid and how much they are entitled to. They include:

  • If your employer needs to have workers compensation cover. Not all employers are required to carry workers compensation insurance. Legislation varies from state to state with some states only requiring the employer to have cover if they have three or more employees.
  • Whether or not you're an employee. Not all workers are recognised as employees when it comes to workers compensation eligibility. Independent contractors (including freelancers) and volunteer workers are not eligible for cover.
  • If negligence of the employer be proven. This is the primary consideration for receiving benefits under worker’s compensation. The injury has to be a direct result of negligence on the employer’s part. If an employee is injured due to his/her own negligence, they will not qualify for a work cover pay out. The worker will also not be eligible for cover if they did not take the necessary precautions i.e. wear protective clothing or use safety equipment provided.
  • If injury occur at the workplace. The injury has to be sustained while the employee is at their workplace. If the nature of the job is such that employees need to work externally, the injury must have been sustained through tasks related to their work.

If an injury does qualify for worker’s compensation, then the amount of money paid out as compensation will depend on the type of injury caused, its severity, and the period of time that the employee is likely to be out of commission.

How do workers compensation benefits work?

One outstanding issue concerning workers compensation is that there is no uniformity in its benefits periods and amounts. Each state has its own workers compensation laws.

There are basically four types of benefits you can have under workers compensation: income replacement, permanent disability, medical benefits, and death benefits.

  • Income Replacement. Income replacement through workers compensation may vary from state to state. Lump sum benefits are determined based on the nature of the injury sustained.
  • Permanent Disability. Under the workers compensation policy, permanent disability or impairment is defined as the illness remains unchanged despite continuous medical treatment. Once deemed permanently disabled, you will be paid a lump sum benefit in addition to your weekly benefits.
  • Medical Benefits. These benefits cover medical costs and other health-related expenses for injuries sustained at work. The amount will again vary from state to state depending on the severity of the accident or injury. However, if the injury or accident happened outside the work premises, you are not eligible to claim.
  • Death Benefits. Just like other insurance policies, your beneficiaries can receive a lump sum benefit in the event of your death to help them cover funeral costs and other living expenses.

Under the policy, you can be paid one or more of these benefits. Moreover, the benefit period is between 13 weeks and 9 years, but is subject to the maximum limits of the lump sum.

What is the likelihood of being injured outside of work?

Workers compensation only pays a benefit for injuries and accidents that occur at work. Statistics have shown that there’s a greater number of accidents and injuries happening outside work – 75% of accidents occur while a person is at home or doing recreational activities compared to 25% of work injuries being related. Furthermore, out of the 700,000 people who sustained work-related injuries, only 216,000 received workers compensation benefits.

See how it works

Injury outside the workplace

John was a builder, working as the employee of a business owner. One weekend he was injured while playing rugby, and suffered two seriously broken arms rendering him unable to work. He didn't think worker's compensation would cover it but took the issue to his representative just to be sure. Unsurprisingly, it didn't.

As such, he turned to his income protection insurance. After not being able to work for 15 days (the waiting period of his policy) he was still disabled, and therefore able to make a claim. The policy ended up paying out 75% of his usual income for 3 months, because this was how long it took for him to be able to start working again. However, after this time he still hadn't regained full strength in his arms and was only able to perform limited duties at reduced pay.

Fortunately his policy also included partial benefits. Because he had yet to regain his full earnings, John's income protection policy continued to pay a portion of the usual benefits even after he returned to work. This went on for another 2 months, until he fully recovered and was able to get back to his previous job and previous earnings.

Without income protection insurance he would have had no earnings for the first 3 months, and only partial earnings for the next 2. This would have meant moving back in with his parents, selling his car and changing everything, all because of a rugby injury. With income protection he remained at 75% of his usual income for the full period, letting him simply focus on recovery, and being able to smoothly get back to his old life once he was better.

Self employed and injured at work

Robert was an electrician and a sole trader with his own business in Melbourne that occasionally hired contractors for big jobs. Due to the risk of workplace injuries he looked into workers compensation, but as a sole trader could not take out a policy on himself in Victoria. As such, he got income protection insurance instead to make sure he was still protected.

A year later it turned out to be a good decision when he was severely electrocuted on the job, and then lost consciousness and suffered a subsequent fall that left him paralysed. If he was an employee of someone else he would have been covered by workers compensation, but as a self-employed individual this wasn't an option.

Instead he made a workers compensation claim. His policy also included business expenses cover, which meant it paid extra to help cover the cost of contractors he had on at the time, and was therefore able to finish the job and get paid for it. Because of this, Robert's business didn't go under after the accident and one of his contractors ended up buying it out, giving some much needed extra money for medical expenses.

Because he knew being an electrician carried some serious risks, Robert also paid extra for a policy with a maximum benefit period up to age 65 instead of getting a cheaper policy that only paid out for a set number of years. He was very glad he did, as his paralysis turned out to be permanently disabling.

Between the extended benefit period and the business expenses cover, Robert's income protection insurance policy ended up being far more important than he expected.

Can I claim income protection insurance and work cover?

It is worth noting that in the event of an income protection claim being paid, the majority of insurance policies will offset any other benefits that may be payable. This could include Workers Compensation, Third Party Insurance and Social Security Payments. This is done to ensure that the insured is not receiving more than they were actually earning at work.

If a benefit payment is reduced as a result of the receipt of some workers compensation payments, some insurers will refund some premiums that have been previously paid by the insured.

Receive income protection quotes from these direct brands and apply

Name Product Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Waiting Period Options
NobleOak Income Protection
2 years or to the age of 65
30 or 90 days
Get 2 months free when joining combined cover. Offer ends in April 30, 2020. T&Cs apply.
Medibank Standard Income Protection
5 years
30 or 90 days
10% discount for Medibank health members & go into the draw for $1,000 Gift Card when you get a life insurance quote.
ANZ Income Protection
5 years
30 or 90 days
Earn 1 Qantas Point for every $1 of premiums paid.
Virgin Tailored Income Protection
5 years
14, 28, 60, or 90 days
AAMI Income Protection
5 years
14, 28, 60 or 90 days
nib Income Protection
2 years
14 or 28 days
Get one month free when paying annually. T&Cs apply.

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