Personal accident insurance – sometimes called personal injury insurance – pays you a financial benefit if you're unable to work due to an accidental injury. This is usually in the form of a lump sum but can be paid in instalments sometimes..
Personal accident insurance is designed to offer you financial stability after a serious accident. Most policies will have a benefit that can cover up to 70-85% of your income.
Here's what you can generally expect to be covered by personal accident insurance policy:
Certain policies will also offer the following optional extras:
While most personal accidental policies we found exclusively cover accidental injuries, there were a few policies we found under the same name that will cover you for illness or sickness. There are also personal accident and illness insurance policies that are designed to cover both.
With most personal accident insurance policies you won't find cover for injuries that are a result of:
You pay a monthly fee and, in exchange, your insurance company promises to pay a financial benefit if you ever suffer a serious injury.
If you buy standalone personal accident insurance, you'll likely get the financial benefit as a lump-sum payment upon injury. For example, you may receive $3,000 if you break your arm.
However, if you buy personal accident insurance as part of a wider income protection policy, you'll receive a monthly payment that is designed to replace a portion of your typical income while you're unable to work. Learn about the differences between personal accident cover and income protection.
When you buy your policy, you also set a waiting period and a benefit period.
This is how long you have to wait after your injury before you can begin claiming. For example, you might set a waiting period as short as seven days or as long as two months.
This is the length of time you can claim the benefit for. Usually, the maximum length you can claim monthly benefits is either two years or five years, depending on the insurer.
A personal accident insurance policy and income protection policy can look pretty similar. However, there will be a few key differences in how it's designed and how it covers you.
Personal accident insurance is usually cheaper and easier to obtain, often without any medical exams or personal questions you need to answer. You'll typically find your benefits paid in a lump sum, meaning if you break your arm and can return to work, you'll still receive your benefit. In contrast, income protection pays benefits in regular instalments, and these payments depend on ongoing verification that you're unable to work.
Another key difference is that personal accident policies allow insurers to refuse renewal if you become a higher risk or make frequent claims. On the other hand, income protection policies are non-cancellable, and are guaranteed to renew as long as you pay your premiums.
Personal accident insurance is not the only type of insurance in Australia that offers financial benefits if you're in an accident or injured and unable to work. Some other options include:
If you become totally or permanently disabled you'll get a lump sum payment. How each insurer defines total and permanent disability can vary, but it usually means an illness or injury has left you unable to work indefinitely.
You get a lump sum payment if you're diagnosed with a critical illness or suffer a life-changing injury like cancer or a stroke. It's usually sold as an add-on to life insurance.
You can get up to 85% of your salary if you can't work due to illness or injury which are paid in regular instalments. Most policies can be extended to cover you up to the age of 65.
If you're self-employed, then you should consider accident and sickness insurance. It can protect you in the event that a serious injury prevents you from working.
If you play sports or lead an active life then consider personal accident insurance. You can compare cover from Australian insurers here too.