Trauma vs TPD Insurance
Trauma and TPD (Total and Permanent Disability) insurance are two commonly used insurance covers. Whilst they offer some of the same benefits, they are different covers that can be used to protect certain events.
This blog post will be comparing and outlining Trauma vs TPD Insurance.
Firstly, before we dive into Trauma vs TPD, let’s start by outlining the key components of each cover type.
Trauma cover is also commonly referred to as critical illness cover. This cover pays a lump sum if the life insured suffers a critical illness or serious injury. It is designed to protect the life insured if they suffer a specific medical event by providing a lump sum payment. The medical events that are covered will vary depending on the insurer.
Some of the main events that may be included in a Trauma cover policy are certain types of cancers, heart attacks, and strokes. To understand what medical conditions are covered under a trauma policy, it is important to review the product disclosure statement.
Trauma insurance is especially useful for individuals who want to ensure that their financial obligations and medical costs are met in the case of a critical condition. The lump sum payment from a trauma claim can be used for various purposes, such as covering medical expenses, paying off debt, or simply providing financial support during recovery.
TPD (Total and Permanent Disablement)
Total and permanent disability insurance (TPD) pays a lump sum if the life insured becomes totally and permanently disabled because of illness or injury. There are two main definitions whilst working for TPD cover which can be selected:
Own Occupation - If the life insured is unable to work again in the job they were working in before the disability.
Any Occupation - the life insured is unable to work again in any job suited to their education, training or experience.
Generally, own occupation cover is more expensive as the cover is related to the existing role. Any occupation can be cheaper, as the insurer can use your experience, education, and training to see if a suitable role is available for you to work in.
TPD insurance is beneficial for those that are worried about the long-term impacts of being unable to work. Whether the individual has a home loan, personal loan, or dependents to support, TPD cover helps to maintain a lifestyle even if they are unable to return to work permanently.
Trauma vs TPD Insurance
Now that we have introduced the two cover types, we will be exploring the differences between the two.
1) Ownership
For new Trauma policies, they can only be held personally. In comparison, a TPD policy is more flexible and can be held through superannuation, personally, or a combination of both. It is important to note that it also depends on the definition (any or own) that is selected as this will impact your ability to hold the cover in your name or through super.
2) Claim Event - Working/Non-Working
Trauma cover is not related to your ability to work, it is based on a medical event occurring, and depending on the severity you may be able to return to work. In comparison, TPD cover is related to your ability to work, and to meet the definition the life insured is totally and permanently disabled.
3) Payment Type
Both covers can be paid as a lump sum payment in a single amount.
4) How long for a claim to be paid
The claim times vary for both covers and will depend on the medical event and severity of the condition. For a comparison of the two, below is an extract from moneysmart.gov.au which identified that for the period Trauma claims were paid to the life insured in a shorter timeframe.
The primary reason for this is TPD cover relates to your ability to work again. As such, the insurer will want to determine that your condition is not short-term, and is something that will result in you being unable to work again. Which can take longer to review compared to a Trauma event which is generally quicker to provide evidence for.
Key Takeaways
Due to life’s uncertainties, it’s important to consider a well-rounded insurance portfolio to protect you and those who matter the most to you. While both trauma and TPD insurance can provide significant financial protection, understanding the differences between the two is essential when deciding which is best for your needs.
The need to hold TPD, Trauma, or both will depend on your individual circumstances. Consulting with an insurance specialist can help you make an informed decision that aligns with your long-term financial goals.
The team at Unified Wealth are insurance specialists and can help to determine which cover types best suit your individual needs and the cover amount required to protect you. Whether you need trauma insurance, TPD insurance or a combination of both, working with a professional can help ensure that you are adequately covered.
After working as an advisor for a decade, Joel founded Unified Wealth.
Unified Wealth specialises in helping clients who are facing life’s big decisions.
Whether you’re contemplating your first property, growing your family or starting your investment journey we can help you focus on the simple steps to help you make your goals reality.
Our priority is making sure you have all the right information available to make the best possible decisions for you and those you love.
Our company values are:
Unity - We are most effective when we work together as a team
Trust - We are trustworthy and act in your best interests
Transparency - We are honest and communicate openly
Education - We are committed to lifelong education
At Unified Wealth our team is highly experienced and provides goal-based advice and solutions for a range of advice strategies.