Is Income Protection Better Than Workers Compensation in Australia?

When it comes to keeping a roof over the head and food on the table if things go wrong, Workers Compensation and Income Protection Insurance get thrown into the mix, but they do very different things – and it’s the difference between them that could make all the difference in the long run.

What Workers Compensation Actually Covers

Workers Compensation is a state-run scheme, so the rules are different depending on where you live and work. So for example in New South Wales a claim is only valid if you hurt yourself on the job or at a work-related event. Which means in practical terms, if you get hurt at home, on the weekend or on holidays, you are pretty much on your own.

The Gap is a Big Problem

And it’s a problem because most accidents and injuries in Australia happen outside of work hours. Slipping in the backyard, a sporting injury, a nasty illness or a car crash on a Saturday arvo — none of these are covered by Workers Compensation. And that leaves most Australians with a hole in their financial protection that they probably didn’t even know was there.

How Income Protection Fills the Gap

Income Protection Insurance is a policy that pays you a benefit (usually about 70% of your pre-tax income) if you can’t work because of a covered condition – no matter where or how you get hurt. So if you’re knocked off your bike on the way home from work, or get sick with a nasty bug, or have a car accident on the highway, then your policy kicks in after your chosen waiting period.

Which makes Income Protection a much safer safety net for most Australians, especially those with a mortgage, family to support or limited savings to fall back on.

Do You Still Need Workers Compensation?

Well yes, you’re pretty much stuck with Workers Compensation if you’re an employee – it’s provided by your employer and it’s mandatory, so you don’t have a choice. But it’s not enough on its own. Income Protection fills in the gaps where Workers Compensation leaves you exposed, so you’re covered for all the things that can go wrong in life.

Which One Is Right for You?

If you’re an employee, you’ll already have Workers Compensation but you really should look at your Income Protection options as well. And if you’re self-employed then Workers Compensation might not apply to you at all, so Income Protection is even more essential.

Getting some advice from an personal insurance broker is the best way to figure out exactly where you stand and where you’re exposed.