At a Glance
- Income protection pays you monthly when you cannot work due to sickness or injury, while accidental death insurance pays out a lump amount in case of your accidental death.
- If you have dependents or work in a high-risk occupation, both insurances can offer extra financial protection.
- Check your current plans to be sure you have the correct coverage for your requirements.
- Combining Accidental Death Insurance and Income protection into a customised policy could provide wider risk management.
Income protection is a valuable safety net to have, but does it cover every potential risk? If you’ve already invested in income protection insurance, you may be wondering whether accidental death coverage is also necessary.
While income protection makes sure you’ll be covered if you are unable to work due to injury or illness, accidental death insurance might offer a layer of security you haven’t considered.
Let’s take a closer look at whether you really need it and how this additional layer of protection could benefit your financial security.
What is Accidental Death Insurance?
Accidental Death Insurance provides a cost-effective way to support your dependents in case of an unexpected death. It pays a lump sum to your beneficiaries in the unfortunate event of your death due to an accident. However, this type of insurance does not cover death due to illnesses, pre-existing conditions, or high-risk activities.
One of the advantages is that the premium is lower than that of other insurance. In Australia, having income protection insurance does not necessarily eliminate the need for accidental death insurance. Your decision will depend on your financial priorities and whether your existing policies provide enough coverage for your family’s needs.
What is Income Protection?
Income protection insurance is a policy that covers a portion of your monthly income if you’re unable to work due to an injury or illness. It usually covers up to 75% of your pre-tax income, and in some cases even 85%, which allows you to focus on recovery rather than financial stress.
Many Australians hold income protection policies through their superannuation funds, while others purchase them directly from insurers or through their employers. Unlike accidental death insurance, this policy does not cover death.
Do You Need Accidental Death Insurance If You Have Income Protection?
Well, it depends on what you want to protect. If your main concern is protecting your income while you’re alive and unable to work,income protection alone may be sufficient.
However, if you have dependents who rely on your income, accidental death insurance can provide financial support to your dependents or family even if an accident results in your death.
Alternatively, you may consider both policiesfor wider coverage and increased financial safety for you and your family.
When deciding to choose a policy, you may consider scenarios like:
- High-Risk Occupations: If you work in a dangerous industry such as construction or mining, accidental death insurance can provide additional peace of mind in case of a work-related fatality.
- Financial Dependents: If you have a family that depends on your income, both types of insurance can protect them, i.e. one in the event of accidental death and the other if you can’t work due to illness or injury.
- Existing Insurance Coverage: Review your current policies. If you already have insurance that covers both accidental and natural deaths, you may not need additional accidental death coverage.
- Policy Limitations: Having both policies doesn’t always mean double benefits. Some insurers have clauses that limit compensation if multiple claims arise from the same incident. That’s why it’s important to carefully review your insurance policies and assess your financial situation to determine the right coverage for your needs.
At the end of the day, the decision is yours. Take time to carefully review your current policies, needs, financial goals and personal circumstances.
Benefits of Having Combined Income Protection and Accidental Death Insurance
If you want the benefits of both policies, you can combine them into a customised policy to have wider coverage. In fact, some insurers already offer this scheme as a personalised option.
Now, let’s explore the advantages you would get by merging income protection and accidental death insurance.
Broader Risk Management
Firstly, combined insurance provides wider risk management as it covers both temporary and permanent financial losses. This means you will have peace of mind knowing that you’re insured in uncertain times with regular income when you’re unable to work due to injury or illness, and also a lump sum amount to your beneficiaries if the accidents or injuries lead to a fatal death.
Increased Financial Support
Income protection helps cover your expenses by providing monthly payments when you’re unable to work due to injury or illness. But it only supports you while you’re alive. If something were to happen to you, like an accidental death, your family wouldn’t receive any financial help.
But if you add accidental death insurance, your beneficiary will receive the lump sum amount if you pass away in an accident. They have both temporary and long-term financial stability.
Cost Effective
Some insurers may offer favourable premium rates in their customised packages. In that case, having a personalised policy could be a cost-effective option for you with comprehensive protection.
Ultimately, consider speaking with a professional insurance provider to gain more detailed insights and personalised solutions. Make a decision wisely after considering all the pros and cons.
