TPD vs Trauma Insurance

If you’re wondering whether a Total and Permanent Disability (TPD) or Trauma insurance policy will suit your requirements, you might want to first consider the differences between these two policies, as well as their respective pros and cons.

However, either policy is not a substitute for the other as they offer different benefits.

Although Trauma insurance and Disability insurance may seem similar; their benefits, price and purpose are different. A Trauma benefit is generally paid as a lump sum when you’re diagnosed with a critical illness listed in your PDS, for example, cancer. Total and Permanent Disablement (TPD) provides a lump sum benefit if you become totally and permanently disabled, as per your TPD definition, because of a sickness or accident.

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What’s the difference between TPD and trauma insurance?

Policy information TPD Cover Trauma Insurance
Maximum sum insured $10 million $5 million
Death cover included when purchased as a stand-alone policy Yes, from select insurers Yes, from select insurers
Built-in benefits
  • Specific loss benefit
  • Financial planning reimbursement
  • Future insurability
  • Premium freeze
  • Indexation benefit
  • Suspending cover
  • Financial planning reimbursement
  • Future insurability
  • Premium freeze
  • Indexation benefit
  • Interim cover
Optional benefits
  • Life cover buy back when TPD is combined with life insurance
  • Double TPD (usually added for an extra fee)
  • Life cover buy back when Trauma insurance is combined with life insurance
  • Free child cover
  • Trauma reinstatement benefit
  • Needlestick benefit
  • Double Trauma (usually added for an extra fee)
Premium options Level, Stepped or Hybrid Level, Stepped or Hybrid
Availability through Super Yes, but only for Any occupation No

What is TPD insurance?

Total and permanent disablement insurance generally pays out a lump sum benefit if you become totally and permanently disabled, as defined in your PDS, due to an injury or illness, and can’t work for 3 to 6 consecutive months, depending on your insurer.

However, you need to be disabled to such an extent that it corresponds with your TPD definition before you will be eligible for the lump sum benefit. The 4 types of TPD definitions usually include:

Own occupation

Pays a benefit if you are unable to ever work again in your specific or current occupation, due to illness or injury.

Any occupation

Provides a benefit if you are unable to ever work in ANY occupation for which you are reasonably suited to by way of training, education or experience.

Home duties

Unable to ever again undertake ALL the regular domestic duties, like cleaning the house, buying groceries and preparing meals for the family, doing the laundry or caring for your dependent children.

Modified TPD (Activities of daily living)

Pays a benefit if you’re unable to perform at least 2 of the 5 activities of daily life; eating and drinking, dressing and undressing, using the toilet, showering and bathing, and unable to move from your bed or wheelchair without the help of a walking aid.

TPD insurance pros and cons

Pros Cons
Pays a lump sum benefit. Only covers total and permanent disablement.
Choice of definition including Any or Own Occupation, Modified TPD or Home Duties. To receive a benefit, you must meet the specific definition of total and permanent disablement according to your policy and PDS.
Ability to enhance your policy with multiple policy options. Generally, all policies convert to Modified TPD at your age 65 or 70.
Large sums insured available. Total and Permanent disablement needs to exist for at least 3 to 6 months, depending on the insurer, before a benefit will be paid.
Premiums are generally tax deductible if the cover is taken through your superannuation Own Occupation definition is not available through your super fund.

Critical illness insurance definition

Trauma Insurance, also known as critical illness insurance, pays a lump benefit if you are diagnosed with a critical illness listed in your PDS. It can cover between 30 and 60 conditions, for example, cancer, stroke and heart attack.

Take note: There is a 90-day waiting period from when your policy commences. If diagnosed with a critical illness, you need to survive for at least 14 days.

Depending on the insurer, you’ll generally have a choice between a Standard or Plus Trauma insurance policy. Standard policies usually cover 30 to 44 core critical illnesses, while the Plus option typically includes an additional 10 to 15 less critical conditions, for example, early stage prostate cancer, early stage melanomas or early stage breast cancer.

Advantages and disadvantages of trauma insurance

Advantages Disadvantages
Pays a lump sum benefit. You need to meet the specific definitions of a critical illness for a claim to be paid.
Can cover up to 60 critical illnesses, depending on your insurer and the policy you choose. 90 Day waiting period.
You can combine Trauma insurance with Life insurance. Can be an expensive policy if choosing a stand-alone option.
Multiple policy options available. Not available through superannuation.

The price difference between critical illness vs disability insurance

The cost of your policy depends on various factors, including your age and gender, health, occupation, cover amount and premium type. However, TPD insurance is generally cheaper than trauma insurance because it’s statistically more likely for a person to suffer a critical illness, such as a heart attack, as opposed to becoming totally and permanently disabled.

Do I need both critical illness and TPD insurance?

Whether you should buy both policy types depend on your specific requirements, specifically your budget, the level of risk associated with your occupation and if you have a family history of hereditary diseases. It’s best to speak with a broker to help you make an informed decision.

Can you combine Life, Disability and Critical illness insurance?

Yes, generally you can have Life, TPD and Trauma insurance in one policy if held outside of superannuation. Although, it is best to check with your insurance provider. Combining cover could save you money and add an extra layer of protection.

However, claiming on one of these policies will usually lower your overall sum insured. For example, if you have a total of $1 million worth of cover and claim $300,000 for Trauma insurance, you’ll only have a total of $700,000 left.

Published: March 15, 2019
  • Your Guide to Comparing TPD Insurance Quotes

    Compare TPD insurance quotes online in less than 60 seconds. Easily compare disability insurance from some of Australia’s leading life insurance companies.

  • Own Occupation

    Own Occupation Total and Permanent Disablement cover provides protection if you can no longer work in your Own Occupation.

  • Are TPD Insurance Premiums Tax Deductible?

    Yes, TPD insurance premiums are tax deductible when an any occupation total and permanent disablement insurance policy is owned by your super fund.

  • Modified TPD

    Not sure about Modified TPD? Learn more about this policy including when it is available, when to consider it and how you can use your benefit!

  • Any Occupation

    Find out more about Any Occupation TPD Insurance from Australia’s #1 Comparison Service including comparing quotes, definitions….

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2 Comments

  • Karen |

    Do I really need TPD and Trauma Insurance? Trauma insurance seems more sensible and useful. If I had a high amount insured for Trauma it would seem more likely to be able to make use of the policy.

    • SPECIALIST
      Anneke |

      Hi Karen.

      Whether TPD or Trauma insurance will best suit you depends on your specific requirements and personal circumstances, as each policy only pays out a lump sum benefit when you meet certain claimable events. Please give us a call on 1300 135 205 and an insurance specialist will assist you in making an informed decision.

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