Suffering an injury or sickness which prevents you from working can wreak havoc on your livelihood and lifestyle. But having to worry about how you’d pay the bills or put food on the table would only add further stress. Personal Accident insurance has been designed to help relieve the financial pressure if you were to suffer an injury from an accident, or a serious illness which prevented you from being able to work or run your business. This insurance is often confused with Income Protection Insurance, so below, we look at the 2 policy types, and highlight the differences and similarities between them.

Personal Accident Insurance is designed to help protect you if you suffer an injury or sickness which stops you from working. It provides you with a weekly benefit for an agreed period, an optional lump sum payment and other additional benefits if you’re injured or sick. It’s an important cover to consider for anyone who relies on their regular income. If you run a small business however, Personal Accident insurance may be even more relevant to you. This is because as a business owner, if you had to suddenly stop working, in addition to your own personal costs, it’s likely you’d also have to face ongoing business expenses and having to pay for those out of your own pocket is not something you’d want to have to consider.

Like Personal Accident insurance, Income Protection is an insurance policy designed to cover your lost income if you suffered an injury or sickness which meant you were unable to work. It generally helps cover your lost income by paying you up to a percentage of your usual income in the event of a claim. In some cases, Income Protection can also cover you for events like retrenchment.

While it may seem like Personal Accident insurance and Income Protection are very similar polices, there are some differences which are worth understanding. One of the key differences between the two is how they’re issued. Personal Accident policies are underwritten by general insurance companies and are mostly available through insurance brokers or direct purchases. Income protection on the other hand is usually underwritten by life insurance companies.

A Personal Accident policy will only cover you for accidental bodily injury or a sickness up to an agreed benefit period (typically up to a maximum of 5 years). However, an Income Protection policy covers a loss of income when you are unable to work for a specified period due to a sickness or injury and a benefit period can be purchased by you to extend cover up until you’re 65. They can also generally be more expensive than a Personal Accident policy due to the extended cover period.

Another difference is in how the benefits are usually paid. Income Protection generally covers your lost income in instalments, rather than lump sum payments. For example, it may cover up to a percentage of your usual income in the event of an injury or illness in instalments. Personal Accident insurance policies on the other hand provide the option for lump sum payments for certain serious injuries, as well as lump sum options if you pass away due to the covered injury in question.

Because both policies cover similar events, it is unlikely you would need to take out both. What’s more, if you did happen to suffer an injury or sickness, it is unlikely you would be able to claim on both policies, as many insurance policies may not cover you for an event if you have already claimed under another policy. That’s why it’s important to ensure you take the time to understand the difference between Income Protection and Personal Accident insurance and decide based on your individual circumstances. To find out more about Personal Accident Insurance, click here.