What’s the difference between life insurance and total disability protection?

Published on December 2nd, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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If you have life insurance, you could have total disability protection included in your policy. However, not all “life insurance” policies will include TPD by default. Some insurers may TPD insurance sell policies separately to “life insurance.” It sounds confusing, but life insurance can also be an umbrella term for insurance against wrongful or accidental death, disability, trauma, income protection, and other types of policies.

The “many” types of life insurance

41% of Australians surveyed by LifeWise, an initiative of the Financial Services Council of Australia, say that life insurance is too complicated. 1 in 4 wouldn’t know where to start. This is why “life insurance” can prove quite complicated. The “umbrella term” of life insurance means your policy could cover you:

  • In the event of death
  • In the event of total and permanent injury
  • Against sudden unemployment or redundancy
  • Against prolonged illnesses or trauma that prevents you from working.

Life insurance may provide a lump sum to your family in any of the above scenarios, or give you regular payments as a substitute for income.

Total permanent disability insurance

Total Permanent Disability (TPD) insurance is a type of life insurance that covers you if you are injured and the injury prevents you from working again. This could mean disability such as not being able to walk again (paraplegia or quadriplegia), severed limbs or fingers, neurological damage, and other permanent injuries.

TPD covers you if doctors or specialists determine you are unable to work again in your field of expertise; or are unlikely to work again at all due to an incurable or permanent condition. Your insurance company then provides a lump sum or regular payment, depending on your policy and how much coverage you have elected to take out.

TPD is distinct from trauma insurance, which supposes you may recover from your injuries and return to work at a later stage. Trauma insurance may also cover rehabilitation; TPD may be structured to provide for carers, modifications to your home, and as a means of covering bills such as utilities, mortgages, etc.

If you want to know more about TPD and how you can protect your family with greater peace of mind, talk to one of our consultants.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.

Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.

For any further information on the variety of insurers compared by Compare Club or how their business works, you can read their Financial Services Guide.

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