Accident and sickness insurance won't offer the same protection as most income or life insurance plans, but the weekly payouts can help those forced out of work to get back on their feet.
Accident and sickness insurance is a short term cover that pays a weekly benefit to tide you over while you cannot work, and is available for the self-employed.
It can help you meet debts such as your mortgage or car loan, as well as ongoing living expenses.
Accident and sickness cover is a more limited than other life insurance options.
What is accident and sickness insurance?
Accident and sickness insurance, sometimes called personal sickness and accident (PSA) insurance, is a short-term cover that can be taken out to protect against financial losses if you can no longer work for a period of time.
It pays a percentage of your salary each month – usually for up to 12 or 24 months – after certain injuries or illnesses that cause disablement; it can cover accidental death too. The benefit from accident and sickness insurance can cover:
The mortgage or loan repayments (car loan, credit card, etc.)
Everyday living expenses (food, school fees, utility bills, clothes, and so on)
Anything else – there's no requirement on how you spend a payout.
How does accident and sickness insurance work?
An accident and sickness policy will typically offer a weekly benefit, or a lump sum, in the event of a successful claim.
A weekly benefit is usually offered for a serious injury or illness that leaves a claimant unable to work temporarily. Whereas a lump sum payout may be offered following an accident that leads to a permanent disablement or death. Let's dig into the policy features in more detail.
In addition to an ongoing monthly benefit, which is often a percentage of the policyholder's income, some benefits that can be found in policies include:
Death benefit: A policyholder's beneficiary could get a multiple of their loved one's monthly benefit if the policyholder passes away.
Nursing care benefit: Benefit paid to cover the costs of hiring an approved professional nurse to care for policyholder if they are confined to bed.
Rehabilitation expenses benefit: Benefit paid to cover various expenses that may arise while the insured recovers. This can include adjustments to their home (i.e. ramps, hand-railings).
Accommodation benefit: Benefit provided to help cover the costs of accommodating an immediate family member who has had to travel if a policyholder is confined to bed due to their injury.
Many of these benefits, if they are available, will need to be added on to a policy for an added fee.
Age requirements
The maximum age at which you can take out sickness and accident insurance cover varies between insurance providers. However, as a general rule, Australian residents aged from 18 to 65 years of age may be able to apply for cover.Most sickness and accident insurance policies will also stop providing cover once you reach a certain age, usually 90 years.
You can find the full list of eligibility requirements in a policy's Product Disclosure Statement (PDS).
Speak to an expert about your accident and sickness insurance needs
Accident and sickness insurance policies in Australia
Provider
Percentage of Benefits Payable
Funeral Benefit
Cooling Off Period
Policy Expiry Age
QBE
100% for death, total permanent disability, limb paralysis, unsound mind, loss of sight and hearing
Yes - Up to $7,500
21 days
65
HCF
100% for accidental death
No
30 days
85
Jim's Insurance
100% for death, total permanent disability, limb paralysis, loss of limbs and sight
No
21 days
70
AHI
100% for death, total permanent disability, limb paralysis, insanity, loss of limbs, sight and hearing
Yes - No specified amount
21 days
70
Family Day Care Australia
100% for death, total permanent disability, limb paralysis, insanity, loss of limbs, sight and hearing
Yes - No specified amount
21 days
70
Chubb
100% for death, total permanent disability, limb paralysis, insanity, loss of limbs, sight and hearing in both ears
Yes - Up to $5,000
21 days
65
*The quotes provided are for 35 year old man, non-smoker who lives in NSW looking for a $500,000 Trauma Cover. Quotes are only to be used as a general guide and are subject to change. For most accurate pricing receive a quote on the Finder quote engine.
Accident and sickness insurance can offer support those who've been turned down for other insurances in the past.
Cons
Policies can be cancelled at any time by an insurer – and there's no guarantee of renewal. Plus, there are far fewer policy features compared with standalone income protection
You can only claim for short periods of time, typically up to 1 or 2 years. Whereas life cover products can pay out until you reach 65
Benefit payments are often linked to loss of income. If your income changes – and you haven't increased your sum insured – any payouts may fall short of the funds you were planning for.
A number of policy exclusions can apply, such as mental illness and sickness from pregnancy.
What's the benefit of sickness and accident insurance if I'm self employed?
Sickness and Accident Insurance provides an obvious benefit to self employed workers that are not covered under group policies from their employer. If you were suddenly unable to keep your business running through your own sickness or injury, a sickness and accident insurance could be your only financial survival opportunity.
Income protection for the self employed
A sickness and accident insurance policy can provide up to 100% of your income, to ensure you are able to continue paying your bills while incapacitated as well as keep food on the table.
While it can be more difficult for self-employed workers to find a provider that is willing to offer cover insurance cover, if the worker has previously been employed in their field as an employee, they can often apply for an indemnity style policy.
Frequently asked questions
Sickness and accident insurance can be an appropriate option for someone looking for a basic level of cover at an affordable price. Sickness and accident insurance typically comes in the form of a lump-sum payment or income replacement. It may be able to provide a good amount of cover for those looking for a short to medium-term policy. However, it's not considered to be a replacement for other types of income protection or standalone life insurance.
Some sickness and accident insurance policies are taken out or renewed annually. This allows the insurer to increase the premium annually to account for any changed circumstances, your age increase, and any adverse claims that may have taken place during the previous year.
Many sickness and accident insurance policies will also offer a lump sum entitlement to either you or your beneficiaries should you die whilst covered, lose any of your limbs, lose your eyesight in either or both eyes, or any illness or injury that results in total and permanent disablement.
Personal accident insurance will offer cover only for accidents that the policyholder has suffered and forces them to take time off work longer than the waiting period. You may receive a benefit of your regular income, up to around 75%, if you're forced out of work for a period longer than the policy's waiting period.
What are the benefits?
Cover is cheaper than income protection insurance
Many people feel they are more likely to be forced out of work by a serious accident than an illness
Cover doesn't require medical underwriting, making for a quicker application process
While there are certain benefits, applicants should be fully aware of how this type of cover could leave them exposed in certain areas e.g. sickness. It is essential to always read the product disclosure statement and be fully aware of all features and benefits.
Think of accidental death insurance as a way to get bigger benefit payouts in the event of a fatal accident. It might be suitable for your needs if you enjoy a risky pastime, or have a dangerous job that is not excluded by the insurance policy.
It depends on your policy. A separate waiting period will generally apply to accidental death or injury riders, but these are usually just as long as the standard waiting period. Accidental death and injury cover will usually become active at the same time as the rest of the policy. However, if you upgrade an existing policy, there may be a new waiting period for the accidental death and injury rider only.
Generally, no. There is typically a waiting period for serious illness riders separate from the waiting period for the rest of the policy.
You can only claim core benefits for illnesses diagnosed after the waiting period has ended, and can only claim the extra serious illness rider benefits for a condition diagnosed after the end of that separate waiting period.
No, these are very different products. Accident and sickness usually pays out a weekly benefit if you suffer an injury of illness that's defined by the policy. Health cover, on the other hand, helps towards the cost of healthcare, both in hospital and out-of-hospital care, depending on your policy.
James Martin was the insurance editor at Finder. He has written on a range of insurance and finance topics for over 7 years. James often shares his insurance expertise as a media spokesperson and has appeared on Prime 7 News, Insurance News, 7NEWS and The Guardian. An experienced journalist, James' work has featured in publications including The Irish Times, Companies100 and In Business. He holds a Tier 1 General Insurance (General Advice) certification and a Tier 1 Generic Knowledge certification, both of which meet the requirements of ASIC Regulatory Guide 146 (RG146).
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