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. This guide focuses on the advantages and disadvantages of both.

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

Secondly we often get asked about the differences between TPD and Income Protection Insurance cover, the former pays a lump sum payment if you are made totally and permanently disabled where the later pays a monthly benefit should you be off work due to an illness or accident. It is important that you consider this topic as well should you want to know more about further options.

To help you better understand the differences we have listed a number of key elements when comparing tpd vs trauma insurance policies and provide further explanation around these:

  • Key policy information
  • How the premiums compare
  • Your TPD policy definition options
  • Advantages & Disadvantages of having TPD cover
  • Your Critical illness (Trauma) insurance options
  • Pros and Cons of having Trauma insurance

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 Occupation DefinitionNo

How do the Premiums Compare?

TPD cover weather you add it to a life insurance policy or if you take out as a stand alone policy is generally cheaper than trauma insurance. The reason for this is because premiums of any type of benefit is generally priced according to the likelihood of the event occurring.

Therefore the below example highlights that statistically it is far more unlikely for a 30 year old male accountant to become totally and permanently disablement vs him suffering a critical illness as defined in a trauma insurance policy. Please note we have used the strongest policy definition for total and permanent disablement cover which is Own Occupation & structured it as a stand alone policy and for the trauma insurance policy we have taken a similar view and used a stand alone PLUS policy which provides additional coverage to the insured over a STANDARD policy.

Premium Example:

Total and Permanent DisablementTrauma Insurance
Age3030
GenderMaleMale
OccupationAccountantAccountant
Benefit Amount$1 million$ 1 million
Insurance TypeStand Alone (Own Occupation Definition)Stand Alone (Plus Policy)
Premium$50.91$120.80

Your Total and Permanent Disablement Definition Options

TPD cover pays out a lump sum benefit if you become totally and permanently disabled, however you need to be disabled to the extent as defined in your policy before you will be eligible for the lump sum benefit. It is important that should you want to take out an appropriate TPD policy it is important you select a policy with the right disablement definition according to your requirements.

Here we cover the pros and cons of the four main definitions or types of TPD insurance 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.

Advantages and Disadvantages of Total and Permanent Disablement Cover:

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

Compare 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
  • This field is for validation purposes and should be left unchanged.

About 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%

Advantages and Disadvantages of Trauma Insurance:

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

Compare Trauma 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
  • This field is for validation purposes and should be left unchanged.

Conclusion

Both of these policies pay a lump sum and the money can be used for any of the followings:

Mortgage and Debt Repayment

Day to day living costs

Medical Expenses

Home Modifications

Published: June 5, 2016

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