Personal Accident Insurance

Personal accident insurance is a policy that pays out a monthly benefit in the event you are unable to work due to an injury or disability caused as a result of an accident. Meaning, your injury or disability cannot be as a result of natural causes, like cancer or heart attack.

Published April 14, 2022

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Why have personal accident insurance?

According to Safe Work, between July 2006 and June 2009, approximately 73 400 Australians were hospitalised because of accidental injury at work. 6% of the injuries were caused by an object falling on or being thrown at a person.

Due to the prevalence of the work related injuries, a number of self-employed people protect their income with personal accident insurance because it is far more affordable than income protection.

Accidents happen every day, which most people are fortunate enough to walk away from. Unfortunately, this is not always the case. Are you protected?

What is personal accident insurance?

Also known as personal injury insurance, these types of policies are not to be confused with accidental death insurance. An accidental death insurance policy differs from personal accident insurance in that it pays your beneficiary a lump sum in the event of your accidental death.

Personal accident insurance policies are generally not medically underwritten. However, you must be unable to work for a specified period of time, indicated by the waiting period in your policy documents, before the monthly benefit kicks in.

It is also important to know, that even though income protection and personal accidental insurance have many similarities, there are some key differences you need to be aware of.

Personal Accident Insurance vs. Income Protection

Personal Accident Insurance Income Protection
Typical monthly benefit up to 70% of your salary. Typical monthly benefit up to 70% of your salary.
Premiums are tax deductible. Premiums are tax deductible.
The monthly benefit is to replace lost earnings should you be unable to work due to accidental injury only. The monthly benefit is to replace lost earnings should you be unable to work due to injury caused by illnesses or injuries.
Generally your monthly benefit can extend anywhere from 2 years to 65. Generally your benefit period options are, 2, 5 to age 65 or age 70
Generally more affordable. Generally more expensive.

What constitutes as an accidental injury?

An accidental injury is a physical injury, caused solely and directly by violent, accidental, external and visible means. It must exist independently of any pre-existing medical condition

For example, if you contracted an illness as a direct result of the medical or surgical treatment you received because of a physical injury, you cannot claim for an ‘accidental injury’.

However, if you are unable to work for a specified period of time, due to falling off a ladder, for example, you can and should claim for accidental injury.

It’s important to note that generally, most accident policies do not cover:

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Do I need personal accident insurance?

If you’re between 18 and 65 years old, drive a car, have a job or people dependent on your monthly income then yes, you should consider personal accident insurance cover. You need to protect you and your family’s financial security, especially if you work at heights, operate machinery or work with electricity, gas, or water.

Accidental only policies are generally a more cost effective option than a full income protection policy, as it only covers you for accidents. However, people with riskier occupations will generally pay higher premiums due to an increased risk of injury.

It’s also important to know that your premiums will also be more expensive when you opt for a:

There are two types of personal accident policies available in Australia

Accidental insurance generally covers you for up to 70% of your income and mainly offers a monthly benefit from 2 years up to 65 years. Like income protection, there are two types of Accidental Injury policies available:

Indemnity Policies

Indemnity Policies protect up to 70% of your income, but you are not required to provide proof of income at the time of your application.

Agreed Value Policies

Agreed Value Policies generally require you to provide proof of income at the time of your policy application, meaning your monthly benefit is locked in. These policies are generally more expensive than Indemnity Policies.

Is personal accident insurance worth it?

An accident can occur at any time and happen to anyone. It is by definition an unexpected and unintentional occurrence, possibly resulting in physical harm. If you want to protect yourself and your family from financial loss due to your inability to work because of physical injury, then yes, personal accident insurance cover is worth it.

Source: Above is the Top 10 by percentage of work related hospitalisations by the most commonly specified causes of injury. Safe Work Australia – Work related hospitalisations between June 2006 to July 2009.

Now, you don’t need to work in construction to get a serious injury. In 2007 Nicole Timbs (Miller), a 22-year-old beauty therapist, was in the backseat of her friend’s car on their way to a nightclub, when a rock came flying through the window, smashing into the side of her skull. Nicole was put in an induced coma and had to undergo months of intense rehabilitation.

Accidents can happen to anyone, at any time. Make sure you’re covered, especially if you are unable to take out a full income protection policy due to your health, high-risk occupation or because of affordability reasons.

Is personal accident insurance tax deductible?

Yes, Personal accident insurance premiums are tax deductible because the policy serves to protect your income, which is tax assessable. However, to claim this tax deduction, you have to be listed as the policy owner and pay your premiums with your own money. Take note that the benefit paid will, however, be taxed.

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