Contingencies
20th May 2025
6 min Quick Look
Focus – What TPD insurance covers, when it applies, and how it compares to life insurance
Key Takeaways:
Introduction
Imagine being injured or diagnosed with a serious illness and never being able to return to work. That’s where Total and Permanent Disability (TPD) insurance comes in.
It provides a one-off lump sum if you suffer a major health event that leaves you permanently unable to earn an income. The payout can help with medical costs, debt repayments, home modifications, and long-term financial support.
But not all TPD policies are equal — and the fine print matters. Here’s what every Australian needs to know about how TPD insurance works, who it’s for, and how to avoid common traps.
Around 1 in 5 Australians experience a disability before retirement age (ABS, 2023). Yet many have no plan for what would happen if they could never work again.
TPD insurance is often bundled inside super without people realising it — but default cover may not be enough, and some policies are harder to claim on than others.
With increasing cost-of-living pressures and tighter insurance definitions since 2019 (driven by APRA reforms), it’s more important than ever to understand what you’re covered for — and whether it still suits your situation.
TPD pays a lump sum (e.g. $100,000 to $1 million+) if you’re permanently disabled and meet the policy’s definition. It’s typically used to:
Replace lost future income
Pay off a mortgage or other debts
Fund long-term care, rehab or retraining
Support dependants
The definition of “total and permanent disability” is key.
Own occupation: You can’t ever return to your specific job.
Any occupation: You can’t ever return to any job suited to your education or experience.
Activities of daily living (ADL): Applies if you can’t perform basic functions like feeding, bathing or dressing yourself. Used in some super-based policies and harder to claim.
Important: Most superannuation-held TPD cover uses the “any occupation” or ADL definition, which is stricter.
Tip: TPD inside super may be cheaper, but outside-super policies offer more flexibility and faster access.
TPD insurance may be particularly useful if:
You have dependants or a mortgage
You work in a physical or high-risk job
You’re self-employed or lack other disability cover
You don’t have enough savings or super to support a long-term disability
A common rule of thumb is enough to:
Pay off your home loan
Cover ongoing living costs for 10–20 years
Fund medical or rehab needs
Example:
If you earn $80,000 p.a. and want 10 years of income replacement = $800,000 cover
Add $300,000 to clear a mortgage = $1.1 million total
Your personal needs may vary — this is just a guide.
TPD pays if you live but can’t work
Life cover pays if you die
You can hold both — and often bundle them together to reduce premiums
I sn’t TPD already covered by super?
Maybe—but the amount and definition may not suit your needs. Many Australians have $100kor less in default TPD cover, which may not stretch far.
What ’ s the difference between TPD and income protection?
Can I have both inside and outside cover?
Isn’t it rare to claim on TPD
Conclusion
TPD insurance plays a unique role in your financial safety net. It’s not just for worst-case scenarios—it’s for peace of mind that, if life changes dramatically, you and your family won’t also face financial hardship.
The key is understanding what you’re covered for, how your policy is structured, and whether it suits your needs—both now and in future.
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Disclosure: General information only. Consider your objectives, financial situation and needs, and seek professional advice before acting.
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