Personal accident insurance is a type of cover designed to provide financial support if you are unable to work due to an insured injury and, where selected, certain illnesses. It is most commonly used by contractors, sole traders, and self-employed business owners whose income depends on their ability to work.
Unlike workers compensation or health insurance, personal accident insurance focuses on income continuity. If you are injured or become ill and cannot perform your normal work duties, the policy may pay a weekly benefit for an agreed period, subject to the policy terms.
What Does Personal Accident Insurance Include?
Personal accident insurance is designed to protect your income and financial stability, not your tools, business assets, or liability risks.
For self-employed people, time off work usually means no income. Bills, rent, mortgage payments, insurance premiums, and business expenses continue regardless of whether you are working. Even a short interruption can place significant strain on personal and business finances.
This type of cover aims to reduce that pressure by providing regular payments while you recover from an insured injury or illness.
While cover varies between insurers, personal accident insurance commonly includes:
- Weekly income replacement if you are unable to work due to an insured injury
- Optional illness cover, if selected
- Agreed benefit amounts, chosen upfront
- Defined benefit periods, which limit how long payments may be made
- Waiting periods before payments commence
- Optional lump sum benefits for accidental death or permanent disablement
- 24/7 cover, which may apply whether an insured event occurs at work or outside of work
All benefits are subject to policy definitions, exclusions, waiting periods, and insurer acceptance.
How Does Personal Accident Insurance Work In Practice?
Personal accident insurance works through a structured claims process rather than automatic payment.
In practical terms:
- You select your cover: This includes your weekly benefit amount, waiting period, benefit period, and any optional extensions such as illness or lump sum benefits.
- An insured event occurs: This may be an accidental injury, or an illness if illness cover has been selected.
- A waiting period applies: You must remain unable to work for the duration of the waiting period before benefits may begin.
- A claim is assessed: Medical evidence and income information are reviewed against the policy wording.
- Benefits may be paid: If the claim is accepted, weekly payments may be made until you return to work or the benefit period ends.
Who Is Personal Accident Insurance Most Suitable For?
Personal accident insurance is most relevant for people who do not receive paid sick leave.
This commonly includes:
- Sole traders
- Subcontractors
- Tradespeople working for themselves
- Self-employed professionals
- Business owners actively working in their business
If your income stops when you stop working, this type of cover may be appropriate to consider.
What Is The Difference Between Injury Cover And Illness Cover?
Most personal accident policies automatically cover accidental injury.
Illness cover is often optional and must be selected at the time the policy is arranged. If illness cover is included, the policy may respond to certain medical conditions that prevent you from working.
Waiting periods for illness claims are usually longer than for injury claims, and pre-existing conditions are commonly excluded.
How Do Waiting Periods And Benefit Periods Affect Cover?
A waiting period is the time between an insured event occurring and when benefits may begin. Common waiting periods include around 14 days for injury claims and longer periods for illness claims.
A benefit period is the maximum length of time benefits may be paid for a single claim. Depending on the policy and your age, benefit periods may extend for months or up to two years.
Both waiting and benefit periods are chosen when the policy is set up.
How Is Personal Accident Insurance Different From Other Types Of Cover?
Personal accident insurance is often confused with other insurance products, but it serves a different purpose.
It is not designed to:
- Cover medical treatment like private health insurance
- Cover employees like workers compensation
- Provide lifelong income replacement like some income protection policies
Instead, it provides short- to medium-term income support for people who work for themselves.
Is Personal Accident Insurance Mandatory In Australia?
Personal accident insurance is not legally required in any Australian state or territory.
However, some contracts may require it as a condition of engagement. In those cases, the requirement comes from the contract, not legislation.
How Do I Make A Personal Accident Insurance Claim?
If you need to make a personal accident insurance claim, the process is generally straightforward, but it does require the right information and supporting documents.
In most cases, the steps involved include:
- Notify your insurer or broker as soon as possible: This lets the claims process begin and helps confirm what information is required.
- Provide medical evidence: You will usually need a medical certificate or report confirming that you are unable to work due to an injury or illness, and outlining any work restrictions.
- Submit income details: Insurers commonly require proof of income, such as tax returns or financial statements, to confirm benefit eligibility and payment levels.
- Ongoing assessments may apply: Depending on the length of the claim, you may be asked to provide updated medical information while benefits are being paid.
Claims are assessed in line with the policy wording, including definitions, waiting periods, exclusions, and benefit limits. Payments generally commence once the waiting period has been satisfied and the claim has been accepted.
If you are arranging new cover or want guidance on how claims are handled before you need to make one, speak with a specialist broker who understands contractor-specific policies.
Understanding how the claims process works before you need it can make a stressful situation far easier to manage if you are ever unable to work due to injury or illness.
How Do I Get Personal Accident Cover?
Getting personal accident cover is usually straightforward and can be arranged with help from a specialist insurance broker who understands contractor and sole trader risks.
In most cases, the process involves the following steps:
- Confirm the type of cover you need: Decide whether you want cover for accidental injury only, or injury and illness, and consider any optional benefits such as lump sum cover or business expense protection.
- Choose your benefit amount and waiting period: Select the weekly benefit you would want to receive if you were unable to work, along with the waiting period and benefit period that best suit your income and expenses.
- Provide basic business and income details: Insurers typically require information about your occupation, business structure, income level, and claims history to assess your application.
- Review the policy terms before proceeding: It is important to understand what is covered, what is excluded, and how claims are assessed before finalising cover.
Once approved, your policy documents are issued and cover can commence in line with the policy terms.
If you would like guidance through this process or want to arrange cover online, you can start by visiting our Personal Accident Insurance Illness Insurance page to learn more, get multiple quotes, and organise the cover that is right for you.
FAQs
Is Personal Accident Insurance Tax Deductible?
Premiums are generally tax deductible when the policy is held to protect your income, as benefits are intended to replace earnings rather than provide a capital gain.
Tax treatment depends on individual circumstances, so professional advice should be sought.
Is Personal Accident Insurance Worth Considering?
Personal accident insurance may be worth considering if:
- You rely on your ability to work to earn an income
- You do not receive paid sick leave
- A period without income would cause financial stress
For many contractors and sole traders, the value lies in reducing financial uncertainty rather than meeting a legal requirement.
What Is Group Personal Accident Insurance?
Group personal accident insurance covers multiple people under one policy, such as employees or contractors engaged by a business, providing similar benefits to individual cover.
What Is Voluntary Personal Accident Insurance?
Voluntary personal accident insurance is optional cover taken out by individuals to protect their own income when they are not entitled to paid sick leave.
Does Personal Accident Insurance Cover Overseas Travel?
Many policies provide worldwide cover for Australian residents, including while overseas, subject to policy conditions.
Does Personal Accident Insurance Cover Medical Expenses?
Personal accident insurance primarily replaces income. It does not usually replace private health insurance, and medical expenses are not always covered.
Does Personal Accident Insurance Cover Heart Attacks?
Heart attacks are generally treated as an illness. Cover may apply if illness cover is included and the condition is not excluded.
How Much Personal Accident Insurance Do I Need?
The amount of cover depends on your income, expenses, and how long you could manage financially without working.
How Do I Make A Personal Accident Insurance Claim?
Claims are lodged through the insurer or broker and usually require medical evidence and income documentation.
Which Personal Accident Insurance Is Best?
There is no single best policy. The most suitable option depends on your occupation, income, risk profile, and required benefits.
