Personal Accident and Illness Insurance

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Last Updated 14/01/2025
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Reviewed by Sharon Kenny 
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Written by

Ellie Garran

Last Updated 14/01/2025

What changed?

Reviewed by Sharon Kenny 
Our aim is to help you make better informed decisions. That’s why iSelect’s content is produced in accordance with our fact-checking and editorial guidelines.

Edited by

Laura Crowden

Reviewed by

Sharon Kenny

Find out more about how we make money.

View our Privacy Policy.

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What is personal accident and illness insurance? 

Personal accident and illness insurance (PAI) is much what it sounds like – a type of insurance that covers accidents and illnesses. Generally, it helps cover your income if you’re unable to work due to an accident or illness. There are also options to potentially cover you in the case of accidental death or disablement. And, unlike many types of business insurance, it applies whether or not the accident or illness was sustained as a result of your work. So whether you trip over a ladder at work or a toy at a kid’s birthday party, you’ll have backup. 

What does personal accident and illness insurance cover? 

PAI is often customisable, but the core thing it covers is income if you can’t work due to an accident or illness. This is usually paid as a benefit of up to 85% of your salary (maximum limits apply) over the period you’re unable to work. It’s also generally possible to be covered for death or disablement, which would mean a lump sum payment if you died or became permanently disabled. 

On top of this, you might be able to choose coverage including: 

  • rehab expenses
  • funeral expenses
  • business expenses
  • chauffeur expenses
  • support for your spouse or dependent children
  • modifications to your house or car if you become permanently disabled 

What doesn’t personal accident and illness insurance cover? 

While PAI policies are quite broad in what they can cover, there are a few situations where you typically won’t be covered. These include injuries or illnesses: 

  • that pre-date the policy
  • related to pregnancy or childbirth
  • resulting from intentional or criminal acts done by you
  • sustained while under the influence of drugs or alcohol
  • sustained while participating in professional sports or motor sports 

As with any insurance policy, every plan will have its differences, so it’s important to check your product disclosure statement (PDS) to know exactly what you’re covered and what you’re not covered for. 

Why would I want personal accident and illness insurance? 

While there are plenty of differences, at its most basic level, PAI has some overlap with workers’ compensation: if you’re injured and can’t work, they both help cover your lost income. So it makes sense that you might be particularly interested in PAI if say, you’re a business owner who is a sole trader and therefore not eligible for workers’ compensation. 

If you’re a contractor, depending on your location, there are different rules that determine whether or not you’re eligible for workers’ compensation.  

What’s the difference between personal accident and illness insurance and life insurance? 

PAI has a lot in common with income protection insurance, which is a type of life insurance. Both cover your income if you’re unable to work due to an injury or illness. But PAI can potentially cover you at a higher rate for a longer period of time. Amounts will vary depending on the plan, but generally, you can expect: 

  • from PAI: up to 85% of your income for up to two years
  • from income protection insurance: up to 90% of your income for the first six months, then up to 70% for a specified time 

If you’re new to working as a contractor or sole trader, you might also find the PAI application a bit more straightforward. Income protection applications can sometimes require paperwork documenting your financial history, whereas PAI applications generally don’t require you to jump through as many hoops. And who loves extra paperwork, right? 

Helpful tip

As with most insurance policies, there’s likely to be a waiting period after purchasing PAI before you can claim. It could range from around a week to a month. The good news is, you’ll likely get to choose your waiting period. The bad news is, the waiting period you choose will impact the cost of your cover.

With that in mind, it’s worth considering the savings you have on hand now should something go wrong. Could you stay afloat for a month, or do you need it to kick in sooner? If you choose the former, you could get away with lower premiums.

Sharon Kenny

Head of Marketing and Partnerships – Bizcover

Can business owners claim personal accident and illness insurance as a tax deduction? 

Yep! If you’re a business owner, you can claim the cost of your PAI premiums against the amount of income you’ve lost. You’ll just need to include any PAI payment you receive on your tax return. 

How do I choose a personal accident and illness insurance plan? 

To figure out the level of cover you want, it’s a good idea to start by looking at your expenses. PAI policies generally cover up to 85% of your salary, so you’ll want to figure out what percentage of your salary you could get by on in a pinch. That means taking a close look not just at how much money you earn, but also at how much you spend on necessary expenses such as groceries, mortgage or rent, utilities, and your car. 

You can also choose from different waiting periods (the amount of time from an injury to when the payment would kick in) and different benefit periods (the amount of time you would receive weekly payments).   

It’s a weird thing to get your head around, but you’ll also want to consider how much money you or your family would need if you died or became permanently disabled. 

Once you have your answers to these questions, you’ll pretty much have your answer to which plan will work well for you.  

Compare personal accident and illness insurance with iSelect and BizCover 

Ready to look for a PAI plan? We’ve partnered with BizCover to help you compare business insurance policies online and select the policy that suits you. Give it a whirl! 

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^As with any insurance, cover is subject to the terms, conditions and exclusions contained in your policy document. The information contained on this webpage is general only and should not be relied upon as advice.

iSelect’s partnered with BizCover Pty Ltd (ABN 68 127 707 975: AFSL No.501769) to help you compare small business insurance policies. iSelect earns a commission from BizCover for every policy sold through the website or contact centre. iSelect and BizCover do not compare all providers in the market, or all policies offered by all providers. iSelect does not arrange policies from the providers we compare for you directly, but iSelect will refer you to our trusted partner, BizCover Pty Ltd who can.

Any advice provided on this website is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice iSelect gives you, having regard to your personal situation, before acting on iSelect’s advice or purchasing any policy. You need to consider if the insurance policy is suitable for you. Please read the Financial Services Guide before buying any insurance policy.