TPD vs Trauma Insurance

Trauma insurance and TPD insurance are both important forms of protection. But what exactly is the difference between the two? Trauma insurance, also known as critical illness insurance, provides a lump sum payment if you are diagnosed with a specific serious medical condition as outlined in your PDS. Total and Permanent Disability insurance, on the other hand, pays a benefit if you are made totally and permanently disabled due to injury or illness.

Published May 11, 2023

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The difference between trauma and TPD insurance

Generally, the main difference between these types of cover is their benefits, price and purpose. However, it’s typically a good idea to remember that either policy is not a substitute for the other as they offer different benefits. Some people choose to take out both forms of cover, as they provide complementary protection.

Trauma insurance cover typically pays you a lump sum benefit which you can use to pay your medical bills, reduce your mortgage, and support yourself and your family financially while you recover. You can typically also use a TPD lump benefit to provide financial support to you and your family while you cannot work. However, the benefits are typically used to help pay for any home modifications you may need to support your new lifestyle and cover your outstanding debts and medical bills.

What is Critical illness cover?

This type of cover, generally also known as trauma insurance, is a type of life insurance that pays out a benefit if you’re diagnosed with an illness as defined in your Product Disclosure Statement (PDS), such as cancer or a heart attack. Trauma insurance policies can be bought as a standalone cover or as an add-on to life insurance. It can give you and your family peace of mind by knowing that you have financial support if you’re diagnosed with a serious illness.

You can typically use the benefit amount from a trauma insurance policy as you see fit. Your trauma insurance policy could help pay for your treatment, make mortgage repayments, cover your medical expenses or simply maintain your lifestyle while you recover.

Pros and cons 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.
It 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. It can be an expensive policy if choosing a stand-alone option.
Multiple policy options available. Not available through superannuation.

What is TPD insurance?

Typically, Total and Permanent Disability (TPD) Insurance provides you with a lump sum benefit if you become totally and permanently disabled and cannot work in your current or any other potential occupation. It’s generally paid if your disability has kept you from working for the past three to six months and was caused by an accident or illness.

There are typically two options available when purchasing a TPD cover: Any or Own Occupation. Own Occupation policies generally pay a lump-sum benefit if you won’t be able to work in your specific or current occupation ever again.

In contrast, Any occupation pays a lump-sum benefit if you cannot return to work permanently in any occupation you are reasonably suited to by way of training, education, or experience. Typically, two other cut-down definitions of total and permanent disablement are available: home duties and Activities of Daily Living (ADL).

Pros and cons of total and permanent disablement cover

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.
You can combine TPD Insurance with Life insurance. It can be an expensive policy if choosing a stand-alone option.

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Compare Trauma and TPD cover

Policy information TPD Cover Trauma Insurance
Maximum sum insured $5 million $2 million
Death cover included when purchased as a stand-alone policy Yes, limited cover from select insurers Yes, limited cover 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 or Stepped Level or Stepped
Availability through Super Yes, but only for Any occupation No

Do you need both trauma insurance and TPD cover?

Whether you should buy both types of insurance typically depends on your personal requirements, and financial position (potential liabilities, assets, ongoing expenses and income) you are looking to protect yourself against . Other factors that may impact your decision may include your budget, the amount of risk associated with your occupation and whether you have a family history of hereditary illnesses. Each type of cover has its benefits and drawbacks, so it’s best to compare the two before deciding.

You can typically use the benefits from a trauma insurance claim to help with the costs associated with your recovery so that you can return to work. However, if your illness or injury is severe and you cannot go back to your work, a TPD policy will help cover your living expenses and maintain your standard of living. However, it may be a good idea to speak with a broker to help you understand your options and make an informed decision.

Combining life, TPD and trauma insurance

Generally, you have the option to combine Life, TPD and Trauma insurance in one policy. However, checking with your insurance provider is typically a good idea. Combining cover could help save you money and add an extra layer of protection.

However, typically your overall sum insured will reduce when you make a claim on one of your combined policies. For example, if you have a total of $1 million worth of life cover cover and claim $300,000 for Trauma insurance, you’ll only have a total of $700,000 life cover left.

Frequently Asked Questions and Answers

  • Is TPD the same as trauma insurance?

    No, TPD and trauma insurance are two separate types of life insurance. TPD covers you for total and permanent disability. In contrast, trauma cover pays a lump sum if you’re diagnosed with a specified medical condition which you could use to supplement your lost income and cover medical costs while you are recovering.
  • Do I need trauma and TPD?

    Generally, this depends on your individual circumstances. If you want the most comprehensive coverage, you may choose to take out both policies. However, if you feel that one type of cover is more suited to your needs than the other, you may decide just to take out a policy for that particular event.
  • Can I claim on both my trauma insurance and TPD insurance policies?

    This will depend on your policy structure, terms and conditions of the product disclosure statement (PDS). Generally for stand alone policies, you could claim on both, however typically for a linked or combined it will pay out only the greater claimable type of cover. However please refer to your relevant PDS
  • What is the life cover buy-back option?

    If you purchase combine your cover under one policy, you may be able to purchase life cover buyback as an additional benefit. Typically, this benefit provides you with the option to buy back the reduced portion of your life insurance in the first 12 months after a full trauma or TPD claim. Fill in the quote form below, or give us a call at 1300 135 205, and a specialist will get back to you.
  • Can you combine trauma insurance and TPD insurance?

    Yes, you can typically combine these types of cover together in one policy. Combining policies could potentially help you save on your premiums. However, it’s important to remember that claiming one type of cover is likely to affect your sum insured for the other types of life cover included in your policy.

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