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:

Policy InformationTPD CoverTrauma Cover
Maximum Sum Insured$10 million$5 million
Death Cover (if stand alone cover)Yes (select insurers)Yes (select insurers)
Built-in featuresInflation Protection, Partial Disability Benefit, Premium Freeze, Financial PlanningInflation Protection, Death Benefit, Premium Freeze, Financial Planning, Partial Benefit,
Policy OptionsTPD Buy Back and ReinstatementTrauma Plus, Trauma Buy Back, Double Tauma
Premium OptionsLevel, Stepped, HybridLevel, Stepped, Hybrid
Available through SuperYes except for Own OccupationNo

What can the lump sum payment be used for?

Mortgage and Debt Repayment

Day to day living costs

Medical Expenses

Home Modifications

TPD Insurance Quotes from Australia’s Leading Insurers

  • Own vs Any Occupation
  • Include with Your Life Cover
  • Cover Available for Stay At Home Parents
  • Free Buy Back Options
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Trauma Insurance

Trauma Insurance, also known as critical illness insurance, pays a lump benefit if you are diagnosed with a critical illness that is specified in the PDS. It can help make sure you are covered financially while you are recovering.

You are generally required to survive for 14 days from diagnosis in order to receive the payment. If death occurs within 14 days, your claim will become a life cover claim if you have a life insurance policy.

What critical illnesses are covered?

Trauma Insurance can cover up to 65 critical illnesses including:


Heart attack


Cancer


Stroke

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

Accidents 0.9%
Bowel Cancer 2.7%
Breast Cancer 20.4%
Other Cancers 33.6%
Central Nervous System Disease 4.0%
Heart Attack 9.4%
Heart Disease 9.9%
Prostate Cancer 8.1%
Stroke 2.9%
Other 8.1%

Total and Permanent Disablement Insurance

TPD Insurance also pays out a lump sum benefit 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 or types of TPD available:

Own Occupation

Provides cover if you are no longer able to work in your own occupation

Any Occupation

Provides cover if you are no longer able to work in Any Occupation

Home Duties

Protects the stay at home partner financially if they can no longer perform home duties.

Modified

Modified TPD provides cover for those who can longer perform the Activities of Daily Living

In order to receive your benefit you will generally need to be diagnosed by at least 1 medical practitioner and will need to be totally and permanent disabled for a period of at least 3- 6 months and have been receiving treatment.

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

Accidents 22.2%
Bowel Cancer 1.3%
Breast Cancer 1.7%
Other Cancers 11.1%
Central Nervous System Disease 5.7%
Heart Attack 1.1%
Heart Disease 2.3%
Mental Illness 16.1%
Musculoskeletal 17.3%
Respiratory System Disease 1.9%
Stroke 3.2%
Other 16.1%

This insurer paid out over $100 million in claims in 2013.

Premiums Compared

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

A critical illness policy may 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.

Premium Example:

Total and Permanent DisablementTrauma Insurance
Age3030
GenderMaleMale
OccupationAccountantAccountant
Benefit Amount$2 million$ 1 million
Insurance TypeOwn OccupationStand Alone
Premium$95.16$107.70

Trauma Insurance Advantages and Disadvantages:

AdvantagesDisadvantages
Pays a lump sum benefit90 Day Waiting Period
Can cover up to 60 critical illnesses14 Day Survival Period
Select insurers offer free child coverCan be expensive relative to life insurance
Can combine with life insuranceNeed to meet specific definition of critical illness in order to receive benefit
Multiple policy options availableNot available through your super fund

Total and Permanent Disablement Insurance Advantages and Disadvantages:

AdvantagesDisadvantages
Pays a lump sum benefitOnly 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 optionsAll policies generally convert at age 65 or 70 to Modified TPD
Large sums insured availableTotal 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 superannuationOwn Occupation not available through your super fund
Published: March 31, 2015
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