Written by: Angelica Adhar If you hold trauma insurance and TPD insurance, or you are unsure which policy applies to your situation, understanding how each policy works can make a significant difference to your claim.
While both provide financial protection during difficult times, they are designed to cover different situations and have distinct eligibility requirements. In this guide, we explain the key differences between trauma insurance and TPD insurance, how each policy works, and what options may be available to you when making a claim.
What is the difference between trauma insurance and TPD insurance?
Trauma insurance pays a lump sum when you are diagnosed with a specified condition listed in your policy. TPD insurance pays a lump sum when illness or injury permanently prevents you from working, and most Australians hold this cover through their superannuation fund.
Trauma insurance | TPD insurance | |
When it pays out | On diagnosis of a specified condition | When you are permanently unable to work |
Where it’s held | Purchased outside superannuation | Usually held through superannuation |
Conditions covered | Specified conditions listed in your policy | Any illness or injury that prevents work |
Mental health cover | No | Yes |
Work requirement | You do not need to stop working to claim | You must be permanently unable to work |
How you receive the payout | Paid directly to you as a lump sum | Paid into your superannuation account first |
What is trauma insurance?
Trauma insurance, also known as critical illness insurance or recovery insurance, pays a lump sum if you are diagnosed with a serious medical condition specified in your policy. The payout is made regardless of whether you are able to return to work.
Trauma insurance covers a defined list of conditions set out in your product disclosure statement, and each condition has specific medical criteria that must be met. A person diagnosed with an early-stage skin cancer, for example, may find their claim is declined because their policy’s definition of cancer excludes certain early-stage diagnoses, even though the condition is serious. Trauma insurance does not cover mental health conditions.
Conditions commonly covered by trauma insurance include:
- Cancer
- Heart attack
- Stroke
- Coronary artery bypass surgery
- Kidney failure
- Major organ transplant
- Blindness and loss of hearing.
If you have already received a trauma payout and your condition has since left you permanently unable to work, you may still have a separate TPD entitlement through your superannuation fund. A trauma payout does not affect your right to claim TPD.
Key Takeaway
Since 1 July 2014, trauma insurance can no longer be taken out through a superannuation fund. If you held trauma cover through your super before that date, your policy may still be in place, but new trauma policies must be purchased outside superannuation, either directly from an insurer or through a financial adviser.
What is TPD insurance?
TPD insurance pays a lump sum if illness or injury leaves you permanently unable to work. Most Australians hold this cover through their superannuation fund, and unlike trauma insurance, there is no defined list of conditions that must be met for a claim to succeed.
The key factor is whether your condition meets your policy’s definition of total and permanent disability. Most superannuation TPD policies use an any occupation definition, which means you need to show you cannot return to any role suited to your education, training, or experience. Some policies use an own occupation definition, which only requires you to show you cannot return to the specific role you held when your condition began.
For example, a nurse who develops a chronic condition affecting their ability to perform clinical duties may meet the definition under an own occupation policy on the basis that they cannot return to nursing. Under an any occupation policy, the insurer may argue they could perform an administrative or non-clinical role, which means the claim would need to show they are unable to perform any work suited to their training and experience.
Key Takeaway
If you have received a trauma payout and your condition has since prevented you from returning to work, you may also have a TPD entitlement through your superannuation fund. A trauma payout does not reduce or affect a TPD claim.
What if your trauma claim is disputed or rejected?
If your trauma insurance claim is disputed or rejected, you have the right to challenge the decision. A rejection is the insurer’s view of your claim at first assessment, not a final outcome.
Trauma insurers assess claims against the specific medical definitions in your policy. A claim can be declined where the insurer determines that your diagnosis does not meet the policy’s definition of the condition, even where the condition is serious.
Common reasons trauma claims are disputed or declined include:
- Your condition is not included in your policy’s list of covered conditions
- The insurer argues a pre-existing condition exclusion applies
- Inconsistencies between your claim form and your medical records.
If your trauma claim has been declined, you can request an internal review through your insurer. If that does not resolve the matter, you can lodge a complaint with the Australian Financial Complaints Authority (AFCA), generally within two years of the insurer’s decision.
A rejected trauma claim does not affect your right to make a TPD claim through your superannuation fund if your condition has left you permanently unable to work.
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When should you speak to a TPD lawyer?
If you hold trauma insurance and TPD cover, or you are unsure which policy applies to your situation, speaking to a TPD lawyer early can help you understand your entitlements and make sure the right steps are taken from the start.
A TPD lawyer can:
- Review your superannuation policy to confirm your entitlements and the definition that applies
- Identify any cover you may hold across former superannuation funds
- Coordinate medical evidence from your treating doctors and specialists
- Prepare and submit your claim to make sure all forms and supporting documents are consistent
- Manage communication with the insurer and respond to requests for further information
- Assist with disputed or declined critical illness insurance claims.
