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NSW, 2060, Australia
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underwriters@afainsurance.com.au.

AFA Personal Accident & Sickness Insurance vs Income Protection

If your client becomes ill or has an unfortunate accident that results in them temporarily not being able to work, financial compensation is available to help them get through.

There are two ways that they can attain financial relief if they find themselves in one of these situations:

  • Personal Accident and Sickness Insurance
  • Income Protection

Both of these products are designed to replace an insured party’s income if they become unfit to work for a certain period.

But while they’re similar, there are some subtle yet very important differences to consider before taking out a policy.

 

What is personal accident and sickness insurance?

Personal accident and sickness insurance is disability cover for certain industries. It is typically offered only by general insurance companies – as opposed to, say, a life insurer.

A person receiving an insurance payout can usually make a choice between a lump sum payment or monthly payments if they suffer an injury that is differently related to an illness or an accident.

These policies are only offered to individuals, so they are distinctly different from group accident and sickness polices. These cover groups such as companies, trade unions and professional bodies for sickness or injuries suffered by their members or workers.

It is important to read the insurer’s product disclosure statement (PDS) which will list what accidents and sicknesses are covered under their policies.

 

What is income protection insurance?

Income protection insurance is protection afforded to the insured party from loss of income when they cannot work for a certain period due to illness or injury.

This insurance is usually protected by life insurance companies, but also some superannuation funds.

Income protection typically provides up to 75% of an insured person’s income.

 

Differences between personal accident and sickness insurance and income protection

There are three main differences, including:

  • The benefit an insured person receives
  • The waiting period
  • The ability of the insurer to cancel a policy during significant life changes

The main difference is that personal accident and sickness insurance can be cancelled by an insurer, income protection insurance cannot.

But there are other differences too, which we’ve outlined below in an easy-to-read table:

 

 

Personal Accident & Sickness

Income Protection

                                Issuer
  •  General insurers
  •  Life insurers

                             Coverage
  • Sickness only
  • Accident only
  • Combination of both accident and sickness
  • 24-hour coverage
  • Illness and injuries both natural or accidental

                                Term
  •  Short- to medium-term disability
  • Longer term coverage

                          Underwriting

 
  • Faster
  • Fewer medical questions
  • More easily deniable
  • More extensive
  • Medical exams may be requested

                          Cancellation
  • Insurer can cancel at their discretion
  • Only insured can cancel

                             Renewal

 
  • Insurer can decline to renew if changes in insured’s health or job
  • Generally always renewable

                              Types
  • Indemnity
  • Monthly benefit
  • Based on insured’s actual income in 12 months prior to accident or illness
  • Indemnity
  • Agreed value
  • Guaranteed agreed value

                            Benefits
  • 85% of pre-disability weekly income
  • Five-year benefit period
  • Weekly benefit up to 156 weeks
  • Optional cover for business expenses and lump sum benefits
  • 75% of insured’s regular income
  • Choice of benefit period up to age 65

                      Waiting periods
  • Sometimes zero-day waiting period
  • Maximum benefit per total claim
  • Minimum waiting period of 14 days
  • Longer waiting periods available

                         Exclusions
  • Exclusions typically broader
  • For example, organised football and mental illness may not be covered
  • Exclusions may include involuntary unemployment, self-harm and miscarriage.

 

Should I choose personal accident and sickness insurance or income protection?

Which policy you should recommend to your clients will depend on their personal circumstances and what they can afford.

If your client is a casual employee and has a fluctuating income, they will very likely have different requirements compared to your regular 9-5 desk clerical employee.

As a broker, you will need to work out your client’s circumstances and have a close look at the policy wording in order to select the right type of product for them.

 

Personal accident and sickness insurance in Australia

If your client becomes sick or finds themselves in an accident, this will no doubt an incredibly stressful time for them.

Provide them peace of mind with our robust personal accident and sickness insurance policy, a competitive product that can meet a wide range of circumstances.

Providing 24-hour cover and a weekly benefit of up to 156 weeks with 85% of an insured’s pre-disability weekly income, our policies are designed to help your client recover and get back to work as soon as they can.

If you have any questions, please reach out to our team at AFA Insurance and we’ll be happy to guide you through our products.