Work Cover vs Income Protection

Workcover Insurance generally provides coverage for employees should they become injured or ill because of their job. Income Protection generally protects employees, owners and self-employed people should they be unable to work for longer than their waiting period due to an accident of sickness occurring either inside and outside of work.

Published September 17, 2015

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Why do I need to have income protection when I have work cover?

This is a common view held by many workers in Australia  – that they do not need a personal income protection policy as they are covered by work cover or workers compensation. While the two types of cover are similar, they are also very different:

What is Income Protection?

A type of personal insurance, it can protect up to 75% of your income if you are unable to work due to a sickness or accident. It covers you both at work and outside of work as well as for both total and partial disablement.

What is Work Cover?

Also known as workers compensation, it is compulsory for most business owners in Australia to have as part of their business. It provides financial compensation to employees if they become sick or injured as a result of their work.

The most important difference is:
Personal Income Protection covers you during and outside of work, whereas work cover only covers you during work.

Compare Income Protection vs Workcover

Income Protection Workcover
Cover for injuries and illness sustained at work Yes Yes
Cover for injuries and illness sustained outside of work Yes No
Maximum monthly benefit $60,000 $7,996.80
Death Benefit Generally pays out 4-6 times your monthly benefit up to a maximum of $75,000 however you can take out a separate life insurance policy. Up to a maximum of $524,000
Covers rehabilitation expenses Yes Yes
Cover for spouse accommodation expenses Yes No
Cover for elective surgery Yes No

About Income Protection

Income Protection Insurance is an insurance type which protects your income if you are unable to work due to a sickness or accident. It generally covers you 24/7 worldwide and you do not need to be at work in order to be covered.

It is generally a fully customisable policy, allowing you to change and alter the policy to suit your specific circumstances.

Benefits of Income protection

Built-in features

About Workcover

Workcover is an insurance policy/scheme designed to protect employees if they suffer an accident or become sick as a result of their job.

Also known as workers compensation insurance, it is generally compulsory for any business in Australia to have cover if the business pays more than $7,500 in remuneration per year or pays less than $7,500 in remuneration per year but has trainees or apprentices working in the business.

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Payments from workers compensation can cover:

Weekly wage payments

The amount you can receive from a weekly wage replacement benefit will differ between states however it could range from $500.00/week – $1999.20/week.
Other people who can receive weekly payments include:

Permanent impairment benefits

If you suffer a permanent impairment you may be able to receive a lump sum payment in addition to the weekly payments and cover of hospital and rehabilitation costs.

In order to claim for permanent impairment, you must have an impairment of at least 10%.

Medical, hospital and rehabilitation expenses

Medical, hospital and rehabilitation expenses may be covered depending on the injury. The following costs may be covered:

Death and Funeral Expenses

Reasonable funeral expenses may be paid following the death of worker. These may include:

The maximum payment for funeral expenses may only be as high as $9,000.

The maximum payment for death may only be as high as $524,000.

The Disadvantage of just relying on work cover:

What are the different workers compensation schemes in Australia?

In Australia, workers compensation is run by a different organisation in each state:

  • Victoria WorkSafe
  • Western Australia WorkCover
  • South Australia WorkSafe
  • Tasmania Workplace Standards
  • ACT Work Safety Commission
  • NSW WorkCover
  • Northern Territory WorkSafe
  • Queensland WorkCover
  • ComCare
  • SafeWork Australia

Workers Compensation Insurance for the self employed

If you are self employed as a sole trader, you are generally unable to take out workers compensation insurance. However if you own your own business and it is incorporated, then you are legally required to take out workers compensation.

While there are no legal requirements to have a personal income protection policy as a sole trader, income protection may be a suitable alternative.
See our Insurance for Small Business Guide for more information.

Frequently asked questions

  • If I take out an income protection policy, am I still covered by Workers Compensation?

    If you work for an employer who is required to have workers compensation insurance then yes you are still covered by work cover even if you have income protection.
  • Can I receive an income protection benefit and a workers compensation benefit?

    The most you can ever receive from an income protection policy is generally 75% of your salary. If you do receive a workers compensation benefit, this will offset any benefits paid out to you by your income protection policy so you don’t receive more than 75% of your salary.
  • Do I need Life Insurance if I am covered by workers compensation?

    While workers compensation may pay out a death benefit and cover funeral expenses, the amounts paid out are quite limited. Also, your family may only receive a payment if death occurs in the work place.

    A life insurance policy can be customised to suit your needs and circumstances and most of the policies we compare have no limit on the amount of life insurance available.

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