Are you a contractor? Find out why personal accident insurance is vital for contract workers and the companies who hire them.
If you're planning on starting work as a contractor or sub-contractor, one of the items at the top of your to-do list should be looking into your insurance cover options.
Why do I need personal accident cover?
Accidents can happen, regardless of where you are. If you're injured at work or outside of work, you could quickly find yourself unable to fulfil a contract, leaving yourself in deep financial trouble.
This is where personal accident insurance comes in. It provides cover in the form of a lump sum payment to help you out in the event of an accident. Personal accident insurance can cover a wealth of contractors including:
- Demolition workers
- Machinery operators
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What is Contractor insurance?
In the modern world, an increasing number of Australian workers are plying their trade as contractors. In order to do so, it's essential that you take out insurance coverage to give yourself the financial protection you need. Contractor insurance provides cover for claims made against you, even false ones, and the legal costs involved in fighting and/or settling such claims.
A typical contractor insurance policy is actually designed to offer coverage for three main groups: the contractor themselves, the company or person you are contracted to, and members of the public who are affected by your contract work. A large portion of the cover provided by such an insurance policy is in the form of public and products liability and professional indemnity insurance.
However, depending on the type of work you do, you may need to look at cover for personal accident and illness, fire and storm damage, burglary and more. A qualified insurance consultant can help you determine the exact type and level of cover you require.
What insurance does a contractor need?
Defining a contractor is a difficult thing to do under Australian law. According to the NSW Government, there are a number of factors that need to first be taken into account, including:
- How likely you are to carry out a task using your own skill and judgement
- Whether you employ others or sub-let work to others
- How likely you are to be paid on the basis of the price you quote for a job
- Whether you supply your own tools and materials
Types of insurance policies for contractors include:
- Public and products liability. This covers your legal liability when your work activities result in a third party suffering bodily injury or property damage.
- Professional indemnity. Whether you need this type of cover will depend on the type of work you do. Designed for professionals who offer specialised advice and services to clients, professional indemnity insurance provides cover against claims you have breached your professional duty.
- Personal accident or illness. This provides a benefit payment if you suffer a specified illness or injury.
- Fire and other damage. This provides cover for your business contents and equipment against loss caused by fire, storm, impact, explosion and earthquake.
- Burglary. This feature provides cover for the theft of things like stock, customers' personal belongings, electronic equipment etc.
- Other. You can also take out cover for features such as glass, goods in transit, fraud and dishonesty, and money.
What is personal accident cover?
Personal accident and illness insurance offers an essential form of protection for many contractors. As the name suggests. it is designed to provide a benefit if the person insured suffers a specific illness or injury. Some policies provide cover for accident only or accident and illness, while it's typically not possible to take out illness only cover.
When you apply for cover, you can select the benefit amount you would like to receive (up to the policy's limit). Then, the exact benefit you receive will depend on the injury or illness you suffer. For example, a policy may pay out 100 per cent of the benefit if you lose sight in both your eyes, but only 50 per cent of the benefit amount if you lose sight in both eyes.
The injuries and illness covered under a personal accident insurance policy can differ between providers but will typically include the following:
- Permanent and total disablement
- Permanent and incurable paralysis of all limbs
- Permanent and total loss of sight in one or both eyes
- Permanent and total loss of use of one or more limbs
- Permanent and incurable major brain damage
- Permanent and total loss of hearing in one or both ears
- Permanent and total loss of the lens of one or both eyes
- Permanent and total loss of use of four fingers and/or thumb of either hand
- Permanent and total loss of use of the toes of either foot
- Permanent and total loss of speech
- Fractured leg or patella
- Shortening of leg by at least 5cm
- Permanent disfigurement from burns
- Weekly benefits are also available for temporary disablement
Anyone who has spent any period of time working at a building site will know just how dangerous such places can be. From falling objects to heavy machinery, there's a huge range of risks that could potentially lead to serious injury.
This is why personal accident and illness insurance is such a good idea for contractors. If you become injured or sick, this type of cover is designed to guarantee that you are still able to receive an income and provide for your family. This can help you repay your mortgage, pay school fees, stay on top of other bills and look after any other expenses that crop up. It can also help you make the modifications and adjustments you may need in order to be able to ensure quality of life with your changed circumstances.
With an adequate level of cover in place, you can simply concentrate on your work without having to worry about how you will cope financially if something goes wrong.
How much does contractor insurance cost?
Cost is always a factor when considering insurance, and insurance providers will weigh up a wide range of factors when assessing your application and determining how much your premiums will be. These include:
- Remuneration. Do you have workers? How much do you pay them in the form of salaries, bonuses and superannuation?
- The size of your business. The bigger your operation is, the more you can generally expect to pay.
- The industry you work in. Certain occupations and industries involve higher risks than others, so expect this fact to be reflected in your premiums.
- The type of work you do. Do you regularly take on big contracts? Does your work involve members of the public regularly interacting with your work site or business premises?
- Your claims history. If you've made a contractor insurance claim in the past, chances are that your insurer will view you as posing an increased level of risk.
- Your age. This can also have an effect on the cost of your personal accident cover.
Q. Do I really need this form of cover?
- A. Yes, this type of insurance cover is highly recommended for contractors. It provides security and peace of mind, ensuring that you will be able to survive financially if illness or injury mean you are unable to work.
Q. Is this the same as income protection cover?
- A. No. Income protection can replace your income until you reach 65 years of age, while personal accident and illness cover only pays a benefit for a set period (usually up to five years). You can find out more about income protection insurance at finder.com.au.
Q. Can I take out cover for accidents only?
- A. Yes, it's possible to take out accident-only cover or accident and illness cover.
Q. I need help finding cover. What should I do?
- A. Speak to a qualified insurance consultant. He or she will be able to offer tailored advice and help you track down a policy that meets all your insurance needs.
It wouldn't be an insurance policy without exclusions, so be wary of the following if you take out personal accident and illness insurance for contractors:
- Claims will not be paid if they arise from pre-existing medical conditions
- Claims connected with military, naval or air force service or operations will not be paid
- Claims relating to any form of competitive, organised sport will not be paid
- Claims arising from diving when using any form of breathing apparatus will not be paid
- Claims relating to things like hunting, racing, open water sailing, bungy jumping, skiing and rock climbing will not be paid
- Claims relating to intentional self-inflicted injuries will not be paid
- Claims arising from your involvement in illegal or unlawful activity will not be paid
- Your claim will not be paid if the injury or illness you suffer is a result of being under the influence of alcohol or drugs, except drugs being used as prescribed by a medical practitioner
- Claims relating to riding a motorcycle as a driver or passenger will not be paid
- Claims related to flying (other than as a passenger on a commercial airline) will not be paid
- Claims related to sexually transmitted diseases won't be paid.
Personal accident insurance is designed to offer a crucial form of insurance cover for contractors. However, make sure to compare your policy options before you apply for the one you think is right for you.