What’s the difference between workers compensation and income protection?
What’s the difference between workers compensation and income protection? If you’re like most Australians, the thought of being unable to work due to illness or injury can be worrying.
Fortunately, there are several types of cover available to ensure you and your loved ones are taken care of in this case.
You may have heard of both workers compensation and income protection and it’s true that both can be used to supplement lost income, however, there are some key differences.
Workers compensation versus income protection: two very different beasts.
Workers compensation, as the name suggests, is designed to support people who sustain injuries or illnesses in the workplace. It is a safety net for workers injured in the course of their employment and it is a mandatory form of insurance paid for by employers.
Workers compensation is not solely an income replacement. Support may include one-off lump sum payments, income replacement, payments for medical and rehabilitation expenses and additional support to help workers return to work.
It is important to note that sole traders are not eligible for workers compensation, and as such, should consider whether an income protection policy is appropriate to their personal circumstances.
Income protection insurance is designed to replace a portion of an individual’s income, should they suffer an injury or illness that leaves them unable to work. It is important to note that income protection covers injuries or illnesses that occur both inside or outside of the workplace, and this is a key difference between the two types of cover.
Income protection benefits can be payable all the way through to age 70 and replace up to 75% of their pre-disability income. There are many variables in an income protection policy to consider, such as waiting periods and benefit periods. It’s important to get advice around how these variables impact your specific situation. Income protection cover can provide a level of certainty that is not available under workers compensation.
Another main difference is that income protection is generally self-funded (although it can be funded through superannuation). Income protection premiums are also generally tax deductible if you decide to pay for it out of your pocket.
What’s the difference between a workers compensation claim and an income protection claim?
If you were diagnosed with cancer or suffered an injury on the weekend while you were not at work, you would not be eligible to claim on workers compensation. In the event that either of these two events occurred and you were unable to work as a result, post your waiting period, your income protection could be claimable.
Can I have both?
If you have access to workers compensation, your income protection payments may be offset against any payments received under workers compensation. So, while you can have both, it’s important to seek advice in order to understand how these policies interact upon a claim.
Your specialist insurance adviser can help you understand the fine details before you take out a policy! For more information or advice on which insurance is best suited for your needs – contact us.