TPD vs Trauma Insurance

You may be deciding to take out a Total and Permanent Disability or a Trauma Cover policy or both. Before you decide which policy to take out, it is important to know what they offer and the differences between the two policies.

In short, neither policy is a substitute for the other as they offer different benefits.

Key policy information:

Total and Permanent Disablement Trauma Insurance
Age 30 30
Gender Male Male
Occupation Accountant Accountant
Benefit Amount $2 million $ 1 million
Insurance Type Own Occupation Stand Alone
Waiting period 3 – 6 months (depending on insurer) 90 Days
Premium $95.16 $107.70

Please note the premiums and cover in the above table are examples only and may not be indicative of actual premiums or cover available. 

Trauma Insurance

This policy pays a lump sum benefit if you are diagnosed with a critical illness that is specified in the PDS.  It is designed to protect you financially if you suffer from one of these conditions and can help cover your medical expenses, mortgage or rent expenses, other debts, loss of income for you and your partner (if they are required to take time off work to care for you) and your on-going or day to day expenses while you recover.

Some of the more common critical illnesses which are claimed on include:

  • Heart attack
  • Cancer
  • Stroke

The policy generally provides cover for up to 60 critical illnesses, depending on the PDS and in addition to the above conditions may also include intensive care, paralysis, Parkinson’s disease, multiple sclerosis, blindness and deafness.

Generally there is a waiting period of 90 days from the date of the policy commencement before you are eligible to make a claim and a survival period of 14 days when a critical illness occurs. If death occurs within 14 days, your claim will become a life cover claim if you have a life insurance policy.

trauma-claims

This insurer paid out over $29 million in claims in 2012.

Total and Permanent Disablement Insurance

This policy is specifically designed to protect you financially if you become totally and permanently disabled and it is unlikely that you will ever be able to work again.

There are generally four definitions available:

  • Own Occupation
  • Any Occupation
  • Home Duties
  • Modified

The policy generally pays a lump sum benefit upon diagnosis by at least 1 medical practitioner of total and permanent disablement and when you have been totally and permanent disabled for a period of at least 3- 6 months and have been receiving treatment.

The lump sum benefit can help to provide a lifetime income for you and your family if you are unable to work again. It can help pay for your mortgage or rental payments, medical expenses, modifications to your home as a result of your total and permanent disablement, other debts and ongoing daily expenses.

An example of the number of claims paid out for 2012 by one of the insurers we work with is below:

tpd-claims

This insurer paid out over $100 million in claims in 2012.

Total and Permanent Disablement vs Trauma Insurance

A TPD policy only ever covers total and permanent disablement and does not cover other conditions that a critical illness insurance policy covers.

Conversely, while a critical illness policy does cover paralysis, the cover from a fully comprehensive total and permanent disability policy extends broader than just paralysis. As a result of covering more conditions it is generally the more expensive policy.

Pros and Cons

Trauma Insurance

Pros

Cons

Pays a lump sum benefit 90 Day Waiting Period
Can cover up to 60 critical illnesses 14 Day Survival Period
Select insurers offer free child cover Can be expensive relative to life insurance
Can combine with life insurance Need to meet specific definition of critical illness in order to receive benefit
Multiple policy options available

Total and Permanent Disablement Insurance

Pros

Cons

Pays a lump sum benefit Only covers total and permanent disablement
Choice of definition including Any or Own Occupation or Modified or Home Duties. Need to meet specific definition of total and permanent disablement according to your policy and PDS in order to receive benefit
Enhance your policy with multiple policy options All policies generally convert at age 65 or 70 to Modified TPD
Large sums insured available Total and Permanent disablement needs to exist for at least 3 – 6 months depending on the insurer before benefit will be paid.
Premiums are generally tax deductible if cover taken out through superannuation

If you would like more information on TPD or Trauma Insurance or if you would like to compare quotes, please contact us today on 1300 135 205.

Published: August 28, 2013