Workers Compensation vs Income Protection Insurance
22 November 2022
Income protection and workers compensation insurance both provide you with financial support if you can’t work due to illness or injury. Getting to know the key features of each, as well as some of the differences, can help you figure out whether you need both – and how protection differs if you’re self-employed.
About workers compensation
Workers compensation insurance is organised by each employer and regulated by state and territory governments – so the exact terms can differ depending on where you live. Broadly, it’s a type of insurance that provides a payout if you’re unable to work because you get injured or become sick as a result of your job – for example, if you break your leg working on a construction site.
Often, workers compensation claims are made by employees who don’t work in an office environment. In fact, according to Safe Work Australia, the three occupations with the highest frequency of serious workers compensation claims are:
- community and personal service workers, and
- machinery operators/drivers.
Regardless of your industry or role, your employer is usually obliged to offer workers compensation at no additional cost to you. You should ask your employer to share the details of your specific arrangements when you take up your role. Since it’s part of an employment package, workers compensation generally does not apply to sole traders or self-employed people.
More information on some of the specific workers compensation agreements for each state and territory can be found on the Fair Work Ombudsman website.
About Income Protection
The coverage of workers compensation is, broadly speaking, restricted to injuries or illnesses that occur in the workplace. On the other hand, income protection generally provides payments if you’re unable to work due to illness or injury – regardless of whether or not the accident or illness happened as a result of work.
For example, if you work in an office and suffer an injury outside work – like a fall – that means you can no longer work in your role, income protection insurance may cover you, but workers compensation won’t. With income protection insurance, you can focus on your long-term recovery and rehabilitation, without the bills piling up.
Like any cover, receiving a payout from both workers compensation and income protection insurance is subject to meeting any applicable product terms.
Suncorp Income Protection Insurance offers monthly payments worth up to 75% of your income, to a maximum value of $10,000 per month. As well as the flexibility to tailor your policy to your specific circumstances, optional add-ons such as Recovery Support benefits may be available. This could help with additional expenses such as childcare or housekeeping until you’re able to get back on your feet.
Can I get cover if I'm a sole trader or self-employed?
As a sole trader, independent contractor or small business owner, you generally aren’t entitled to workers compensation, since you aren’t an employee of an organisation. Sole traders or those who are self-employed could find themselves at greater risk of being financially impacted by periods of illness or injury, particularly since common workplace protections like sick leave aren’t available.
If you are self-employed and you or your loved ones rely on your income to keep up with regular expenses, like a home loan or utility bills, it could be worth considering other ways of protecting your finances such as income protection insurance.
How much does income protection cost?
To keep your income protection insurance up to date, you will need to pay regular premiums. The exact amount will depend on the level of cover you choose, as well as the relevant waiting periods and benefit period associated. Figuring out how much cover you need depends on your personal circumstances, including:
- your current household income
- your levels of debt, and
- the number of dependents who rely on your regular income.
If you need help estimating how much income protection insurance is suitable for you, you can use Suncorp’s income protection calculator.
The good news is that premiums you pay for income protection insurance are typically tax deductible. Whether you can claim a tax deduction will depend on how your insurance is structured, and whether it is part of your superannuation and your own individual circumstances. Your financial adviser or accountant will be able to share how to report these premiums in your annual tax return.
- How to seek financial assistance when you can’t work
- Too busy? 5 ways business owners can reclaim their time
- What’s the difference between Life Insurance and Income Protection?
Suncorp Life Insurance products, other than in some circumstances the Redundancy Benefit, is provided by TAL Life Limited ABN 70 050 109 450 AFSL 237848 (TAL Life) which is part of the TAL Dai-ichi Life Australia Pty Limited ABN 97 150 070 483 group of companies (TAL). TAL is not part of the Suncorp Group. TAL uses the Suncorp brand (part of the Suncorp Group) under license.
Any advice on this page in connection with the Life products is general in nature and is provided by Platform Ventures Pty Ltd ABN 35 626 745 177 AFS Representative Number 001266101 (PV). PV is part of the Suncorp Group and an authorised representative of TAL Direct Pty Limited ABN 39 084 666 017, AFSL 243260 (TAL Direct). General advice does not take into account your individual needs, objectives or financial situation. Before you decide to buy or to continue to hold a Life Products you must read the relevant Product Disclosure Statement. The Target Market Determination (TMD) for the product is available on our website.