What is personal accident insurance?
Personal accident insurance is a form of cover that protects you financially in the event of an injury sustained from an accident. If an incident occurs, accident insurance will cover you either in the form of a lump sum (TPD insurance) or replace your income (income protection).
Do I need accident insurance?
Personal accident insurance can provide you cover in the event of an injury sustained from accidents. Some of the reasons to consider this form of cover include:
- Various payment types. Ongoing income replacement or a lump sum payment.
- Replace lost income and cover other expenses caused by the injury. This can include the costs of rehab and what's not covered by your health insurance.
- Usually no medical underwriting required to take out standalone cover. This a viable option for applicants that have been refused life insurance cover in the past.
- May be more affordable than full income protection policies. Accident-only is standalone cover without all the bells and whistles.
Am I covered for accidental deaths too?
Personal accident is covered by various types of insurance. Here's how it works:
You're covered if you get into an accident that leaves you either:
- Unable to work
- With a defined injury (on some policies)
How am I paid out?
You'll either receive either as a lump sum payment or monthly income protection depending on whether your policy is:
- Standalone personal accident cover
- Total and permanent disability (TPD) cover
- Income protection
How does each type of personal accident cover compare?
|Type of cover||What's covered?||Payout type|
|1. Standalone personal accident||Specific injuries due to accidents e.g. factures, burns and dislocations||Lump sum|
|2. TPD cover||Injuries and illnesses that leave you permanently disabled||Lump sum|
|3. Income protection||Injuries and illnesses that put you out of work temporarily||Monthly income replacement|
Workplace accidental injury and disease claims in Australia
|Strains and sprains||42.40%|
|Contusion with intact skin surface||5.60%|
Source: Key Work Health and Safety Statistics, Australia 2014 Learn more about workplace injuries and statistics in Australia
A sample policy could cover these types of injuries.
What does this include?
|Death & Total Disablement||Quadriplegia|
|Accidental loss of life|
|Disablement||Permanent total or partial loss of eye sight|
|Permanent total or partial loss of hearing|
|Permanent total loss of use of one or two limbs|
|Permanent total loss of speech|
|Leg and arms|
|Fracture injuries||Thumbs, Fingers, Toes|
|Collarbone or Sternum|
|Kneecap and elbow|
|Wrist, Ankle, Hand, Food|
|Cervical e.g. neck|
The table above is for illustrative purposes only and is not indicative of all policies available on the market.
There are a number of other benefits you can get from having such a policy:
- Personal accident insurance premiums are tax deductible: The premiums you pay on income protection accident cover can be claimed as a deduction at tax time, so that you get more back in your tax return, and more money in your pocket.
- Choose how your benefit is paid: When you make a successful claim, you may want to receive your benefit as a lump sum payout to help with upfront medical expenses, or have your benefit paid as an ongoing monthly income to help with your living expenses. Or you can choose to have your benefit paid as a combination of lump sum and ongoing payments.
- Total and permanent disability benefit: Most personal accident insurance policies will include a benefit payout for total and permanent disability, where you are not able to return to work at all because of an accident. For example, if you suffer a total loss of speech, hearing or sight, or the total loss of the use of a hand or a foot, you are considered to be eligible for a total and permanent disability benefit. TPD cover will also include a payout for accidents which result in paraplegia or quadriplegia.
- Hospital cash: Your policy can include hospital cash benefits, which is a benefit amount calculated for each night you spend in hospital.
- Double benefit payouts: You can also look for a personal accident insurance policy which offer double or triple benefits if your accident is sustained while you are travelling, or for disappearance or exposure.
- Associated accident costs: When you suffer an accident there are a lot of incidental costs involved, and a personal accident insurance policy can provide a benefit payout to cover, counselling, rehabilitation, the cost of any damage to clothing or personal property and the cost of any specialist transport required to get you to hospital.
Can I customise my personal accident cover with additional features?
You can also often customise your personal accident insurance to include features such as:
- Automatic renewal: This means that once your policy is approved, your insurer guarantees to renew your policy at the end of each contract period, or for a time specified in the policy – often up to two years.
- Cover for business expenses: You can choose to have your business expenses insured as well and this cover can mean your insurer pays your weekly business expenses as they occur, or a set amount of business expenses stipulated in your insurance policy agreement.
- Work and leisure cover: Some policies will only cover you for accidents which occur at work, but make sure you are covered for all accidents, at any time.
- Transport insurance: Make sure vehicle accidents are covered in case you are driving or are a passenger in a vehicle when you are injured, you are on public transport or you are a pedestrian when you are hit by a motor vehicle.
- Volunteer work: You can also be insured if you undertake volunteer work and can be insured for accidents which occur during your volunteer hours.
Personal accident insurance does not generally cover:
- Injuries which have been self inflicted as the result of a suicide attempt
- Dental injuries
- Illnesses (on standalone personal accident insurance cover)
While you can’t expect the unexpected – because then it wouldn’t be unexpected – you can prepare for the worst by protecting yourself and your income with personal accident insurance. Plus, even if the worst doesn’t happen you are still rewarded with peace of mind and tax deductible premiums.
How do I make sure I'm covered when I make a claim?
Follow these key steps before you sign up for a policy:
- Understand the full list of injuries/accidents that are covered. If it's not listed, it won't be covered.
- Disclose your medical history and work information. If you don't disclose, you can be denied for a claim later on.
- Understand if your workplace provides cover. Some policies won't pay out if you're entitled workers compensation.
Why might claims be denied?
Some reasons for claims being denied can include:
- Pre-existing medical conditions or injuries. Many policies will not cover pre-existing medical conditions and injuries
- The exact injury or illness is not covered. Most policies will have a defined list of injuries and illnesses that they will cover.
- Non-disclosure. Claims can be denied if applicants don't disclose a pre-existing condition or injury (even if it's covered), or an occupation they are not covered for.
- Workplace injuries. While personal accident insurance will cover workplace accidents, claims may be denied on some policies if you're entitled to compensation from you workplace.
Personal accident insurance can benefit many Australians of many occupations. These include:
Benefits are not restricted to paid work, and volunteer workers can get access to personal accident insurance in case they are unable to perform their duties. In this instance, the organisation they volunteer for is covered if they lose one of their volunteers for a period of time. Family day carers: Family day carers can also be covered by personal accident insurance, which can be particularly useful as most carers are self employed and if they are unable to work there is often no one else to help with income or business support. Self employed workers also don’t usually have access to employment benefits such as sick leave and in this instance personal accident insurance can protect up to 75% of your income if you need time off from work to recover from an injury. Personal accident insurance for carers can cover:
- Up to 75% of average gross weekly income.
- Benefits paid for up to 52 weeks.
- After a 30 day excess period.
- Accidents which occur at any time of the day or night, anywhere in the world.
- Without a medical check, although pre-existing conditions are often excluded.
- A benefit amount you choose.
- A range of payment options for premiums, where you can make payments monthly or yearly.
- A HIV accidental infection benefit.
- Complications from pregnancy or birth for up to 10 weeks.
- Bereavement leave for two weeks if there is a death in your immediate family.
At the same time, you may be thinking about how many scraps and scrapes your children get into and so you may want to know more about children's’ personal accident insurance. Accident cover for your children can protect them if they suffer a serious injury outside of your home. Knowing your child is protected if they have an accident at childcare for example can afford you peace of mind knowing that you won’t have to be out of pocket for all of the medical expenses for an accident which occurred while you weren’t there. School students can also be covered by personal accident insurance when they are on the school grounds and many schools have policies which cover staff, students and visitors such as sporting teams playing away.
Many workers in the trades industry can benefit from having personal accident insurance in place. This type of cover can provide financial protection should you fall ill, be injured or pass away (for some policies). In some cases with manual labourers and tradesmen, you may find it difficult to apply for income protection cover depending on the level of risk that you are exposed to when carrying out the duties of your occupation. Personal accident insurance can serve as the alternative cover for manual workers that are looking to secure their ability to earn an income should anything happen to them.
Athletes, professional and extreme sports players
Many athletes competing at a professional level will have been insured by their team or sports club against an injury as the loss of a star player can mean the loss of a championship season. While you may not have made it to the big leagues just yet, you can still take out a personal accident insurance policy if your body is how you earn your living. Professional dancers for example can take out a policy which covers them for broken bones and soft tissue injury for up to 52 weeks and there is a range of policies available for athletes in any field.
This will depend on the type of personal accident insurance that you have:
|Type of cover||Age of entry||Age limit|
|1. Standalone personal accident||18||70|
|2. TPD cover||16||64|
|3. Income protection||18||64|
Note: exact age limits will vary between each insurer.
- Personal accident insurance. Will usually only pay a lump sum of cash after an accident where you have suffered an injury.
- Income protection insurance. Will pay an on-going benefit while you are off from work after an accident. Income protection insurance generally also includes benefits for sickness. Therefore, personal accident insurance is generally classified as a policy which pays a cash sum, and income protection insurance generally pays monthly benefits.
While some personal accident insurance policies may provide cover in the event of death, it is important to note that there are some notable differences to life insurance. These include:
|Personal Accident Insurance||Life Insurance|
|Type of cover||Provides a lump sum, monthly or weekly benefit in the event that you are ill or injured in an accident and unable to work.||Provides a lump sum payment in the event of your death or if you have diagnosed with a terminal illness with less than 12 months to live.|
|Cover amount||Limited benefit amount and depends on your average income at the time of application.||Unlimited cover,|
|Continuation of cover||On cancellable basis||Renewable until you turn 99 years old, provided that premiums are paid when due.|
Which is right for me?
There is no one 'right' policy, however as a general rule of thumb:
- Life insurance is for adequate protection to cover your family financially in the event of your death
- Accident insurance is cover in the event an injury
What determines how much I pay for cover?
There are several factors that can affect the cost of your personal accident insurance premiums, including:
- The waiting period. The shorter the waiting period you select, the more you will typically have to pay for cover.
- The benefit period. Longer benefit periods attract higher personal accident insurance premiums.
- Your occupation. People who work in high-risk occupations generally have to pay more for cover. For example, someone who works on a construction site would typically pay more for cover than an accountant.
- Whether you choose an agreed value or indemnity value policy. The benefit you receive under an agreed value policy is agreed upon when you apply for cover, while the benefit amount under an indemnity value policy is worked out based on your income at the time you make a claim.
- Your benefit amount. The higher the benefit amount you are eligible to receive, the more you will have to pay for cover.
- Your age. The older you are, the greater your risk of accidental injury and therefore the higher your premiums.
Personal accident insurance can seem like a duplicate policy if you already have life insurance, accidental death cover, and you know you’re protected by workers compensation cover. However, if you already have life insurance with accidental death cover, you may still want to take out personal accident insurance. Plus, if you think you don’t need personal accident insurance, think about how you would pay your bills and care for your family if you were unable to work because of an accident which happened outside of the workplace – where Workcover has no jurisdiction. You may consider taking out personal accident insurance if:
- You don’t have the savings or the means to pay your living expenses without your income. If you suffer an accident which renders you unable to work, your policy can pay you a benefit of up to 75% of your income.
- You want to be protected until you retire. When you think about it, the years you spend at work are a very large part of your life, and in that time there is a good chance you will break your leg skiing, sprain your ankle walking the dog, burn yourself while cooking, or suffer a myriad of other common accidents which could see you miss work for an extended period of time. However, with personal accident insurance you can choose a benefit period of two years, five years, or choose to receive a payout for a successful claim until retirement age, when you can access your retirement savings and investments.
- You are self employed or employed on a casual or contract basis: If you work in your own business, or your employment terms don’t entitle you to sick leave benefits, then you may want personal accident insurance to protect your finances in case you are unable to work. Even those whose employment benefits do include sick leave, you are usually only entitled to a certain number of days paid sick leave each year, and if you exhaust them in the case of an accident, you will be without an income.
- You want to protect your finances: Most of us are carefully managing and balancing our finances at the best of times and if you are unable to earn an income your financial security will very quickly show the results. If you’re unable to pay your bills you may receive debt collection notices and the bills will be reported on your credit file. You won’t be able to meet the payments on your loans and your interest rates may increase, and you won’t be able to contribute to your savings and so your holiday dreams or plans for the future will be affected. If this sounds like a situation which could happen to you, then you should have personal accident insurance to maintain stability in your financial life, even if you are unable to work.