Keep up with your ongoing expenses in the event of a serious illness or accident.
No matter what job you do, you depend on your wellbeing to cover the bills and put food on the table. Having to take time off work for an extended period can have a devastating impact on your own livelihood and that of your family. Accident and Sickness Insurance helps you keep on top of your expenses while off work so you don't have to dip into your savings. Most policies will cover you for;
- Serious illness
- Serious injury
- Permanent total disablement
- Loss of a limb
- Death (if caused by accident)
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An accident and sickness policy will typically provide either a monthly benefit or a lump sum payment.
|Benefit type||Type of event|
|Lump sum benefit|
What can a payout be used for?
The benefit from Sickness and Accident Insurance can ensure the insured and their financial dependents (if any) can maintain their current way of living if they are forced to take time out of work for an extended period of time. This ongoing monthly benefit can cover;
- Mortgage and other outstanding debts (car loan, credit card)
- Everyday living expenses (food, school fees, utility bills, clothes etc.)
- Change in lifestyle expenses e.g. modifications to the house
What are some of the additional benefits offered by sickness and accident cover?
In addition to the ongoing monthly benefit of 75% of the policyholders income, additional benefits that can be added to some sickness and accident policies include;
- Death benefit: Policyholders beneficiaries will receive a multiple of their monthly benefit if the policyholder is to pass 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 benefit: Helps cover the cost of the insured enrolling in an approved rehabilitation program.
- 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 that has had to travel a defined distance to stay with the policyholder if they are confined to bed as a result of their injury.
- Overseas assistance benefit: Paid to help cover the costs of returning the policyholder to Australian shores if they have become totally disabled overseas for a defined period of time.
These extra benefits can provide great relief to the policyholder and let them focus on their recovery.
Is personal accident and sickness insurance right for me?
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.
Note: While Personal Sickness and Accident Insurance can provide an affordable insurance solution for many, it must be remembered that these policies can be cancelled at any time by the insurance company and will not offer the same range of product benefits and features to that of a typical income protection policy.
How does Sickness and Accident Insurance compare to the past?
Commonly know as Income Protection Insurance today, it is designed much like Personal Accident and Sickness Insurance In the past. Some key differences of Income Protection Insurance today;
- More comprehensive range of benefits for policyholders. Receive cover for the additional expenses that may arise while recovering.
- Set benefit periods. Usually ranging from 2 years, 5 years, to age 65 or age 70 depending on the policy.
- More competitive market. Arrival of major banks with life insurance companies has seen the Australian market become highly competitive in the range of products and premium pricing offered.
Some of the key characteristics of sickness and accident cover in the past include:
Limited Range of Features
Sickness and Accident Insurance policies of the past took on a much more “one size fits all” approach and were generally quite simple in terms of built in features and policy benefits. Income Protection Insurance can now offer applicants a much more comprehensive level of cover with additional benefits to help cover the costs of rehabilitation, critical illness, nursing care, child care and various bed confinement benefits. Essentially, policies of the past did not have the same flexibility to be tailored closer towards the specific needs of different buyers.
Longer Benefit Periods
With sickness and accident insurance in the past, if the severity of the workers sickness or accident meant that they were unable to return to work again, they would be provided with an ongoing benefit payment of 75% of their regular income right up until they passed away.
Variable Benefit and Waiting Periods
Applicants for sickness and accident insurance used to be able to adjust their waiting period to meet their needs. Policies could be adjusted so the benefit period could be shorter or longer depending on the nature of the policyholders accident or sickness.
Greater Cost of Cover
While there were some definite benefits to these longer benefit periods and flexible waiting periods to policyholders, it also mean that these policies were significantly more expensive to current income cover policies offered. Applicants of today can find an affordable cover that appropriately matches their current and future needs with a greater range of policies offering diverse level of cover.
Can I get accident and sickness income protection?
Yes you can. Income protection insurance can cover you when you suffer a sickness or accidental injury and are unable to work as a result. When this happens, income protection cover offers a monthly benefit as a replacement for your normal income, usually covering up to 75 per cent of your pre-disability income.
With income protection cover in place, you don’t have to worry about making ends meet while you are unable to earn an income. Instead, all you have to do is focus on your recovery and getting things back to normal.
What is the maximum age of eligibility?
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 75 years of age are typically 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. Check your PDS for the eligibility requirements of your policy.
Is sickness and accident insurance tax deductible?
In many cases, the premiums you pay towards sickness and accident insurance are tax deductible. In order to claim a deduction, you’ll need to be able to show that the premiums are an expense incurred in order to provide cover for your ability to earn a taxable income.
However, if you hold accident insurance through your superannuation fund, you won’t be able to claim your premiums as a tax deduction. Keep this in mind when deciding how you will take out cover.
What is accident-only insurance?
Accident Only Income Protection 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. The policyholder will begin to receive a benefit of 75% of their regular income if they are forced out of work for a period longer than the 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 does not require medical underwriting
- The individuals smoking status does not matter
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.
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 will give your up to 75% of your gross income, to ensure you are able to continue paying your bills while incapacitated as well as keep food on the table. The reason why the amount paid is restricted to 75 percent of your income is that there still has to an incentive for you to return to work once you have recovered.
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. This is usually only necessary for workers that have been self-employed for less than 12 months. After this period, the worker will usually be able to apply for an Agreed style policy.
What are the drawbacks of personal accident and sickness Insurance?
Despite these benefits, applicants need to remember that their policy can be cancelled at any time. Personal Accident Insurance should be viewed as a basic type of cover with a limited range of protection. There really is no substitute to the level of cover offered on an Income Protection Plan.
- Benefit can be subject to change: People who take out personal accident insurance cover are generally restricted to an indemnity styled product. This means that their benefit will be subject to change depending on any fluctuations in their income in the last 12 months. This is not the case for Income Protection where applicants also have the option to take out policies on an agreed value basis which ensures their benefit will remain the same as that which was initially applied for.
- Limited Range of Cover: Personal Accident Insurance policies do not offer the same degree of coverage to that of Income Protection Insurance. The additional benefits and features found with Income Protection can ensure the policy is tailored to match the customers needs.
- Benefit Periods: Personal Accident Insurance will only provide policyholders a benefit period of up to five years whereas Income Protection will provide cover up to the age of 65.
- Different Benefit Periods: Personal sickness and accident insurance will have a defined waiting and benefit periods for sickness and for accident. Income Protection policyholders will be covered for both illness and injury until the age of 65.
What types of sickness and accident claims are people making
|Condition||Total % of claims (males)||Total % of claims (females)|
|Ischaemic Heart Disease||16.30%||2.50%|
|Benign Brain Tumour||5.60%||2.70%|
Source: General Reinsurance
|Strains and sprains||42.40%|
What are the top causes of accidents in Australia?
In Australia overall:
|Cause||Percentage of total causes|
|Other unintentional causes||32%|
|Crashes during transport||12.2%|
|Poisoning from pharmaceuticals||0.6%|
|Poisoning from other substances||0.4%|
2012–13 hospitalised injuries in Australia, Australian Institute of Health and Welfare.
Your frequently asked questions
Is critical illness insurance worth it?
Critical illness insurance should be considered as a policy which pays extra for particularly severe illnesses like cancer. It is designed to cover additional expenses like ongoing care, rehabilitation, refitting a home for disabled access or acquiring more expensive medical treatment than might otherwise be available.To work out if critical illness insurance is worth the cost, you should know what is and is not covered by your health insurance for these conditions, and whether you have an elevated risk of these, such as a family history of certain types of cancer.
Is accidental death insurance worth it?
Think of accidental death insurance as a way to get bigger benefit payouts in the event of a violent fatal accident. It might be suitable for your needs if you enjoy a risky pastime, have a dangerous job which is not excluded by the insurance policy or are otherwise at high risk.
What does annual renewal mean?
Most 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. Weekly benefit payments will be paid should you receive temporary total or partial disablement or temporary total disablement if it is the result of an illness
How much does accidental death and critical illness insurance cost?
These riders typically cost less than the core life insurance policies, and when purchased by themselves will generally cost less than life insurance. This is because they cover a much more specific set of conditions. Compare quotes from multiple providers to get an idea of how much it will cost you.
Are critical illness and accidental death insurance premiums tax-deductible?
In Australia, tax-deductible premiums are those paid for policies which protect against loss of income. In the case of typical life insurance policies with riders for critical illness and accidental death, it is most likely that none of it is tax-deductible. However, there are likely exceptions if you have purchased life insurance through superannuation.
Does accidental death cover start immediately?
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.
Can I make a serious illness claim right after my policy begins?
Generally not. There is typically a waiting period for serious illness riders separate to 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.