Personal accident and illness vs income protection — what’s the difference?

29 May 2024

When it comes to safeguarding your financial stability as a tradie, understanding the difference between Personal Accident and Illness Insurance versus income protection is crucial. Both types of insurance provide vital support, but they serve different purposes and offer different protections.

In this blog post, we'll clarify those differences to help you choose the right coverage for your needs.

What is Personal Accident Insurance?

Personal Accident Insurance is designed to offer financial security in the event you suffer an injury or illness that prevents you from working. It provides benefits like lump sum payments or weekly benefits, which are predetermined and specified in the policy.

This type of insurance is essential for maintaining your lifestyle and obligations during recovery.

Who needs Personal Accident insurance?

Personal Accident insurance is particularly vital for business owners, sole traders, and independent contractors who cannot afford the luxury of paid leave and who may face significant financial distress if incapacitated.

It ensures that personal and business expenses are covered, which provides holders of Personal Accident Insurance peace of mind during challenging times.

What DOES Personal Accident Insurance cover?

This insurance covers specific injuries and illnesses listed in the policy, providing either a lump sum payment or a series of weekly payments. It's tailored to help maintain your financial stability, covering periods when you are unable to work due to accidents or severe health issues.

Additional options may include coverage for accidental death and business expenses.

What DOESN’T Personal Accident Insurance cover?

Personal Accident Insurance does not cover everyday illnesses, like colds, or pre-existing conditions unless specified. It also excludes injuries sustained through self-harm or during illegal activities.

Most important to note is that it does not cover you if you are still able to work in any capacity, unlike broader income protection policies.

How are Personal Accident and Income Protection insurance different?

While both Personal Accident and Income Protection insurances are designed to provide financial assistance when you're unable to work, they serve different purposes and have distinct features.

Here, we’ll break down the differences to help you determine which coverage best fits your needs.

Differences in cover

Personal Accident Insurance typically includes a broader range of coverage options, such as accidental death and specific injuries, and may apply 24/7 or just during work hours.

In contrast, Income Protection focuses solely on replacing income lost due to illness or injury, with no coverage for fatal outcomes. This makes Income Protection more about financial continuity rather than specific incident coverage.

Differences in benefit payment

The way benefits are paid out also varies significantly between the two.

Personal Accident Insurance may provide a lump sum or weekly payments, depending on the injury or illness severity.

Income Protection, however, generally provides a steady flow of income replacement, paid in instalments, which typically aligns better with regular income patterns. This helps you manage ongoing expenses during recovery.

Differences in insurance companies

The providers of these policies also differ.

Personal Accident Insurance is usually underwritten by general insurance companies and can be purchased directly or through brokers.

Income Protection is more often managed by life insurance companies, reflecting its nature as a long-term income replacement source.

Differences in cost

Cost considerations are crucial as they reflect the extent of coverage.

Income Protection often commands a higher premium due to its broader and more flexible benefits, such as covering a wider range of illnesses and potentially longer benefit periods.

Personal Accident Insurance tends to be less expensive, reflecting its more limited and specific coverage scope.

Do I need both Personal Accident and Income Protection?

Deciding whether you need both Personal Accident and Income Protection insurance hinges on understanding their distinct benefits and your specific circumstances.

Here’s a brief comparison to guide your decision:

Personal Accident Insurance: Income Protection:

Given that both types of insurance cover similar events, it's uncommon to require both. Typically, choosing one depends on your job nature, financial stability, and coverage requirements.

Here are a few pointers:

Consider Personal Accident Insurance if: Opt for Income Protection if:

Ultimately, the choice depends on balancing your financial needs with the type of risks you are most likely to face in your line of work.

Get a quote for your business

Are you unsure which coverage is best suited for your needs? Our team at Tradesure is ready to help. Discover the right protection for your business and ensure your peace of mind by exploring our range of comprehensive insurance solutions.

Not sure where to start or need some help deciding the right coverage for you? Get in touch with our friendly staff team today, and we’ll be more than happy to help.

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