What is the Difference Between TPD and Trauma Insurance?
If you’re reviewing critical illness and TPD insurance for the first time, you’re probably wondering what’s the difference; both are designed to alleviate the financial strain that comes with an injury or illness, right?
The main difference between critical illness and disability insurance is that:
- TPD insurance pays a lump sum benefit if you are totally and permanently disabled and can never work again, either in your Own or Any occupation.
- Trauma cover pays a lump sum amount for a listed medical condition, regardless of your level of disability and capacity to work.
Are TPD cover and trauma insurance the same thing?
No. Disability insurance and critical illness cover offer different benefits, and each has its advantages and disadvantages.
For example, if you are diagnosed with cancer and have a trauma insurance policy, you will generally receive payment upon diagnosis. However, if you have a TPD policy, your claim will usually only be valid if the cancer renders you totally and permanently disabled and unable to work.
Also, TPD is available inside superannuation and trauma insurance isn't.
Advantages of disability insurance
- Lump sum benefit to help pay your mortgage, outstanding debts, medical expenses and home modification.
- 4 types of TPD definitions to choose from: Own occupation, Any occupation, Home duties and Modified TPD.
- Available as a stand-alone policy or as a rider on your life insurance.
- Large sum insureds are available.
- You generally do not have to repay the lump sum benefit if the newest medical advances have helped you to return to work.
Disadvantages of TPD insurance
- Only covers proven total and permanent disablement.
- Must meet the policy specific definition of TPD for a claim to be valid.
- You'll have to wait for 3 to 6 months before lodging a claim.
- At age 65 or 70, disability policies generally covert to Modified TPD.
- Own occupation TPD is not available through your super fund.
Advantages of critical illness insurance
- Protects you financially if you suffer a medical condition listed in your PDS, irrespective of whether you're able to continue work or not.
- Lump sum benefits help you cover the cost of lost income, home care services, medical bills, and rehabilitation services.
- If you’re physically able to do so, you can usually continue working after your diagnosis and still receive your benefit.
- Generally, covers up to 60 critical illness 24 hours a day, 7 days a week, anywhere in the world.
- You typically have the option to include child cover, either for free or for an additional fee, depending on the insurer.
Disadvantages of trauma insurance
- Premiums are usually more expensive than TPD because it covers a wide range of illnesses.
- If you have a pre-existing medical condition, your insurer may choose to either exclude cover for that particular medical condition or request you pay a higher premium to cover the risk.
- Trauma insurance is not available through superannuation.
- You’ll usually have to wait 90 days before claiming a benefit.
- The benefit is generally only payable after the survival period, which is typically 14 days.
Review Trauma Insurance Policies
Disability insurance vs critical illness cover
|Key differences||TPD insurance||Trauma cover|
|Maximum sum insured||$10 million||$5 million|
|What's covered?||Own occupation, Any occupation, Home duties or Modified TPD.||Standard policies cover up to 44 critical illnesses. A Plus trauma policy, covers up to an additional 15 conditions.|
|How does it pay out?||Lump sum payment||Lump sum payment|
|Waiting period||You’ll generally need to be absent from work for 3 to 6 consecutive months after the illness or injury.||A 90-day waiting period is usual for trauma insurance with a 14-day survival period for stand-alone policies.|
|Built-in benefits||Partial disability benefit, future increase benefit, premium freeze, indexation benefit, premium waiver, suspending cover benefit, and financial planning benefit.||Financial advice benefit, guaranteed renewable benefit, premium freeze, automatic indexation, death benefit, and premium waiver.|
|Additional options||Life cover buy-back, double TPD and reinstatement.||Trauma buy-back and double trauma.|
|Standard exclusion||Intentional self-inflicted injury||Intentional self-inflicted injury|
|Tax treatment||TPD premiums are generally tax-deductible to the fund if taken through superannuation.||Premiums are generally not tax-deductible, but the lump payment is usually tax-free.|
|Available through super||Yes||No|
Is there any reason to have both critical illness and disability insurance?
Disability insurance and critical illness cover do seem similar, but each has its advantages and disadvantages. Neither is a substitute for the other, but you can combine TPD and trauma cover with your life insurance policy and be more fully covered.
Compare Critical Illness Quotes
Critical illness insurance, also known as trauma insurance pays a lump sum should you suffer from a listed critical illness
Obtaining trauma insurance for diabetes sufferers is becoming easier as insurers understand more about diabetics however thier condition needs to be well controlled
Heart attacks are the second highest trauma insurance definition claimed on in Australia. This is why trauma cover is so important for Australian Families