Workers Compensation or Income Protection?

If you have been injured at work and have income protection insurance, should you seek workers compensation entitlements? By Barney Gask.

The advantage of having income protection is that it covers you for any injury or condition that renders you unfit for work, whether that injury is sustained during work or outside of work, such as at home.

Let’s assume the injury or condition allows you to choose between both entitlements. Which is financially the better option? Most income protection policies have a waiting period which is generally at least 30 days, sometimes three months. The advantage of workers compensation payments is that they commence immediately from when the incapacity for work begins. There is no waiting period and there is the opportunity to be paid interimpayments whilst the employer or Return to Work SA (through their agents) is investigating the injury.

Income protection tends to be paid at a percentage of normal income, often 70 percent. Workers compensation payments are paid at 100 percent for the first 52 weeks, then 80 percent for the next 12months until the payments cease. Workers compensation payments are calculated using an average of the income for the 12 months prior to the incapacity commencing unless for some reason that calculation does not arrive at a fair average.

The duration of Income protection payments varies from policy to policy. They will continue until you return to work, or at least for two years. Some policies allow payments to continue through to age 65 as long as the injury continues to cause an incapacity for work. Workers compensation payments continue for 2 yearsunless you are considered to be seriously injured. To be seriously injured you need to be assessed by a doctor of having a whole person impairment of 30% or more.

So, what is the better option? Nearly all income protection policies take into account a situation where you may also be in receipt of workers compensation payments. They don’t allow you to “double up”. Accordingly, if you are injured at work, workers compensation is always the better option. There are also other advantages. A workers compensation claim also entitles you to medical treatment which income protection does not, and if the injury results in a permanent disability it may entitle you to lumps sums.

Not all injuries or conditions occur at work which is where income protection is important. It is particularly important for those who are self-employed and may not be entitled to workers compensation. The premiums are not cheap, and not within everyone’s budget, but if you are after financial protection to cover all situations, then income protection is the go.

Tindall Gask Bentley is South Australia’s largest personal injury law firm. For a free initial interview about your workers compensation matter, contact Barney on (08) 8212 1077 or register online here.