Accidental Death Insurance in Australia for Those on a Budget

Published: May 24, 2018

If you are unable to obtain full life insurance coverage because it's too expensive or because of a medical condition or dangerous occupation, accidental death insurance might be an excellent way to protect your family's financial future should you die because of an accident.

Accidental death insurance in Australia is designed for people who can't get a term life insurance policy but still want to provide financial benefits to their loved ones if they should suddenly and unexpectedly pass away due to an accident. For example, deaths from drowning, falling, traffic and construction accidents, fireworks discharge etc.

What is accidental death cover?

Accidental death cover is a specific type of life insurance that only pays out a lump sum benefit if you die due to an accident. There is no payout for an illness or natural death. Coverage can usually be acquired without a medical exam and no underwriting and is usually cheaper than life insurance since coverage is limited to accidental causes only.

Policy Maximum Cover Maximum Entry Age Expiry Age  
NobleOak Direct Life Insurance AIA
$15,000,000
69
99
Protect your family with Life Insurance and pay on average 20%* less when compared with other insurers. T & Cs apply. Consider the PDS. Issuer is NobleOak Life Limited ABN 85087648708. AFSL 247302.

An accidental death policy can usually be purchased as a stand-alone policy or as a rider on your regular life insurance policy and will typically payout if death was caused by an accident, for example:

  • Road accidents
  • Drowning
  • Fire
  • Electrocution
  • Hijacking
  • Murder

What is considered an accidental death?

Accidental death is usually defined as death from a physical injury caused solely and directly by violent, external and unexpected means. This type of death should not be traced to the life insured’s state of mental or physical health before the event.

Road accidents are the leading cause of accidental deaths in Australia.

Australian road deaths by road user group: January 2017 to April 2018

Source: Australian Government: Department of Infrastructure, Region Development and Cities

Accidents at work occur less frequently but are more likely for people working in high-risk occupations that are not able to find affordable life insurance cover.

According to Safe Work Australia as at 11 May 2018, 46 Australian workers were killed by accident at work in 2018, 17 in the transport, postal and warehousing sector, 11 om agriculture, forestry and fishing and 10 in construction.

Worker fatalities between 2003 and 2016 were primarily from vehicle collisions, falls from a height, being hit or trapped by a moving or falling objects.

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What does accidental death insurance cover?

Accidental death policies usually cover the insured person for the amount agreed to in their product disclosure statement (PDS) if death is caused solely and directly by accident, violent, external and visible means without other contributing factors. Meaning, natural causes, illnesses and self-inflicted deaths are not covered.

The benefit payment can be used to help your family pay for your final expenses and cover the cost of their day-to-day living, including things like the mortgage, car repayments and school fees.

Coverage is usually available to Australian residents between the ages of 18 and 64 and expires at age 99, depending on the insurer.

The benefits

  • Easy and quick application process with no medical questions or medical exams required.
  • Guaranteed acceptance, despite your medical history, occupation and lifestyle.
  • Covers deaths resulting from many occupations that standard term life insurance policies will not cover.
  • Usually able to extend coverage to include personal accident insurance.
  • Generally, premiums are very affordable.
  • A choice between $500,000 up to $1million worth of cover depending on the insurer.

The average cost

The premium you pay will depend on the level of cover you want, your age when the cover begins, and your gender. Usually, insurers will have different rates that apply to each occupational category, generally, the higher the risk, the more expensive your premium.

The amount of coverage you need depends on the lump sum benefit your loved will need when you’re no longer there to provide your income and support.

Does life insurance cover accidental death?

Yes,  life insurance policies will generally pay the amount you are covered for if you pass away due to both natural and unnatural causes, including accidents. The typical exclusion in Australia is that of suicide within the first 12 to 24 months of your policy commencing.

What's the difference between accidental death insurance and term life insurance?

Both life insurance and an accidental death policy is an agreement between you and the insurance company to pay your listed beneficiaries the lump sum of money in the event of your death in exchange for a premium paid monthly, quarterly or annually. The main differences are in the underwriting and the cover provided.

Life vs accidental death insurance

Term life insurance Accidental death cover
In most cases requires medical and occupational information when applying for a policy. Guarantees acceptance. Generally, does not require a medical exam and usually, no health and occupation questions will be asked.
Typically provides more coverage than accident only insurance, including instances of death resulting from illnesses and natural causes. The policy only pays out in case of accidental death, and it must be proven that an accident directly caused death.
Term life insurance is generally more expensive than accident insurance. Premiums are usually cheaper because it only covers you in case of death due to an accident.
You can typically choose the amount of life insurance cover you want when buying a retail policy. Cover is usually limited to between $500,000 and $1million lump sum benefit, depending on the insurer.

When deciding which type of cover is suitable for you, it’s essential that you review your family’s financial needs in the event of your death.

Is accidental death insurance worth it?

Accidental death cover makes it easier for you to protect your family in case of your death and provides an affordable alternative to life insurance cover when you are not able to obtain it because of a pre-existing medical condition, a hazardous occupation or your budget.  

It might also be an excellent option for younger Australians who do not have a family relying on their income. Younger people are usually at higher risk of suffering an accident and passing away, most probably to a more carefree, sometimes reckless, way of life.

Exclusions

Accident only life insurance policies typically exclude coverage if death occurs 3 months or more after the accident. Other general exclusions you need to be aware of includes:

  • Natural Causes
  • Surgical complications
  • Mental illness
  • Suicide
  • Drug abuse and overdose
  • Intoxication and drunk driving
  • Illegal activity and war
  • High-risk sports and activities like skydiving and motor racing
  • Engaging in professional sports as your occupation.

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Frequently asked and answered questions

Does accidental death insurance cover heart attack?

No. Death due to a heart attack is usually viewed as natural causes because it refers to an internal factor and not an external cause, like trauma from a car accident. On your death certificate, it will generally state that death was "natural" when the result of a heart attack.

However, if you were to suffer cardiac arrest because of an accident, for example, the shock of your car smashing into another vehicle, your claim might be valid. Please request the help of a specialist in such circumstances.

What is an ‘Interim Accidental Death Benefit'?

Some life insurance companies in Australia might include a complimentary interim accidental death cover certificate in their product disclosure statement (PDS). This usually means that a lump sum payout could be made if you die due to an accident within the first 90 days from when you signed your application.

However, instances of war, self-inflicted injury, suicide, and the direct or indirect effects of alcohol and/or drug abuse will not be covered. 

Does accidental death life insurance cover cancer?

No. If you were diagnosed and die of cancer, your accidental death coverage would not pay a benefit because cancer is an internal disease and usually seen as a natural cause of death.

Is accidental death cover taxable?

Usually, you cannot claim a tax deduction for the premiums you pay for your policy. Make sure to consult a tax professional.

Does accidental death life insurance cover drug overdose?

No, typically death due to an accidental or intentional drug overdose will be excluded from accident only death cover.

When will an accidental death claim be denied?

Your claim might be denied if the cause of death was determined to be natural causes or the result of any of the exclusions listed in your insurer's PDS. For example, no accidental death claim will be paid if death was caused because of suicide, surgical complications, motor racing or drunk driving.

Does accidental death insurance cover homicide?

Insurers in Australia do not generally define murder as an exclusion under accidental death policies. As long as death is directly related to an external, visible, violent means in which the insured was not participating in any unlawful or criminal activity, death will usually be covered.

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