KNOW YOUR COVER: INCOME PROTECTION, WORKCOVER & TAL

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Tom Carstein  is a Financial Adviser who specialises in risk management. Tom can be contacted via email  tom@ambleside.net.au

Tom Carstein is a Financial Adviser who specialises in risk management. Tom can be contacted via email tom@ambleside.net.au

19 March 2019

Income protection, Transport Accident Commission (TAC) and WorkCover are three types of insurance that can provide compensation if you can’t work due to injury or accident. There are key differences between these insurances regarding what they cover, when you’re covered and how much you will be paid. In this article Tom provides an overview of the three systems.

INCOME PROTECTION
Income protection (IP) covers the widest range of incidents, critically including cover outside of the workplace and outside of transport accidents. The benefit is up to 75% of your salary and can be paid to you for between two years and right up to the age of 70 (‘benefit period’). Claimants also have to wait for a period of time between suffering the incident and receiving the funds (‘waiting period’). This can also be varied, typically between 14 days and 12 months.

Unlike WorkCover and TAC, which are compulsory insurances, IP is voluntary, and the premium is paid directly by the person taking out the cover. There are a number of options that determine the premium, including your age, occupation, benefit period, waiting period and amount of cover. You also have the choice of paying the premium directly from your bank account, or from within your superannuation fund.

IP is the most comprehensive form of insurance and covers you for many situations that WorkCover and TAC do not. As a result, it is the most expensive of the three insurances. IP is available directly through your superannuation fund, online and through a financial adviser. The quality and cost of the cover can vary greatly, and we recommend you talk to us about your cover requirements.

TRANSPORT ACCIDENT COMMISSION
TAC provides ‘loss of earnings’ payments where injury or death takes place as a result of a transport accident or injury. The benefit can initially be paid for a period 18 months to a value of 80% (maximum of $1,350 per week) of your income from work to assist with living expenses, medical bills and rehabilitation costs.  TAC is a compulsory insurance that is paid as part of the vehicle’s registration fee. It is a no fault scheme, meaning payment will be made even if you cause the accident. It is important to note that the vehicle being operated must be registered, meaning it is important for farmers to avoid the temptation of using unregistered vehicles on the farm.

You must have been in a form of paid work prior to the accident or injury event (including casual, part-time, full-time and self employed) and have experienced an injury or illness as a result of a transport accident. For more information check http://www.tac.vic.gov.au/clients/what-we-can-pay-for/policies/other/loss-of-earnings-benefits.

WORKCOVER
This is a compulsory insurance that employers must pay to cover employees for work related incidents. There is no waiting period and compensation is based on 100% of an employee’s income. Payments can cover wages, medical expenses or rehabilitation costs and is generally capped at 130 weeks.

In order for WorkCover to apply, the incident that has caused you to become ill or injured must have occurred whilst at work or when completing their work-related duties. It will only cover those who are employed and does not apply to those that are self-employed. For more information check https://www.worksafe.vic.gov.au/simple-guide-workcover-insurance

CONSIDERATIONS
In the event of an injury you may have the option to claim under TAC, or WorkCover, or income protection; however you generally cannot claim more than one type of insurance at a time.

A key advantage of income protection is it covers you outside of the workplace and transport accidents. An example of this is an IP policy can provide cover in the event you suffer an injury playing football.

You may be eligible for WorkCover even when the injury has no connection with actual work duties, for example authorised breaks, travelling between worksites, or on a work trip. Importantly there is no WorkCover entitlement travelling to and from work at the start and end of day. 

In situations where you have the option of TAC and WorkCover it is often the case that WorkCover is more difficult to deal with because of the restrictive nature of the legislation. In addition TAC usually pays more towards legal costs.

This is a complex area and if you need to make a claim it is important you claim under the right system. We strongly recommend you seek financial and legal advice to fully understand your options.

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