In Australia, the regulations around workers’ compensation vary between different states and territories, especially when it comes time to covering company directors.

A working director is usually a director who does work for or on behalf of the company, and is paid as a company director for their services.

Take Western Australia as an example. Here, a director who is actively involved in the day-to-day operations of the company is only eligible for workers’ compensation if the company has explicitly requested the cover. This means that the cover is not automatically provided and must be actively sought out.

Moving over to Queensland, the situation changes. If you’re a director, partner of a partnership, sole trader, or trustee, you won’t be covered by Queensland’s Workers Compensation cover. Unfortunately, there is no option to extend this coverage to these individuals.

Income Protection Insurance as a Safety Net

Given the variability and limitations of workers’ compensation for directors across different states, income protection insurance becomes an essential consideration. It provides a safety net, ensuring that directors can maintain their income in the event of an illness or injury that prevents them from working. Income protection policies can be tailored to cover up to 70% of a director’s income and can offer flexible waiting periods.

Income Protection Insurance vs. Workers’ Compensation for Company Directors

Income protection insurance is a crucial consideration for company directors, primarily due to its comprehensive coverage compared to workers’ compensation. The scope of workers’ compensation can be limited or optional for directors, contingent on the specific regulations of each state or territory in Australia.

One of the key advantages of income protection insurance is its applicability to a wide range of circumstances. Unlike workers’ compensation, which is typically confined to work-related injuries or illnesses, income protection insurance extends its coverage to incidents that occur outside the workplace. This means that if a director suffers an injury or falls ill outside of work hours or off the company premises, they can still receive benefits through their income protection policy.

Conclusion

For company directors in Australia, understanding the nuances of workers’ compensation and the comprehensive benefits of income protection insurance is crucial. While workers’ compensation may offer some level of protection, it’s often limited and varies by state. Income protection insurance offers a more reliable and extensive safety net, ensuring financial stability in the face of unforeseen health challenges.