Holding TPD cover in your super will affect how you’re covered.
TPD cover in super can be cheaper, but less comprehensive.
TPD cover that’s bought via super has a better average claims payout time in comparison to TPD policies bought via a broker.
What is total and permanent disability (TPD) insurance?
TPD insurance covers you if you become totally and permanently disabled and are unable to work because of this. It helps cover medical bills and ongoing expenses, like a mortgage, that you'd struggle to pay without your income.
There are two different types of total and permanent disability insurance available:
Your own occupation. You can claim it if you're unable to work again in the job you did before your disability. This cover is typically more expensive. Any occupation. This cover can be claimed if you can no longer work in any jobs suited to your education, training or experience. This cover is usually cheaper and less likely to pay out because say, for example, that you were previously a surgeon before disablement, you may still be able to work as a GP or doctor.
How is TPD covered in super?
In some cases, TPD cover is included as standard in your super. This is not always the case though, so it’s worth checking.
If you do have TPD cover via your super, be aware that age can affect how you’re covered. For example, cover typically expires at age 65. Additionally, if you’re under 25 years-old and have less than $6,000 in your super account, TPD won’t usually be covered.
If you’re not already covered and you’d like to be, get in touch with your super provider and let them know. They’ll be able to point you in the right direction and set up the cover for you.
Should I get TPD cover through super?
It depends what you want to be covered for and how you like to pay your TPD premiums.
Pros
Cheaper premiums: Getting TPD through your super is typically cheaper than buying it via an insurer. This is typically because the super provider can buy policies in bulk and they tend to be less comprehensive. So be aware of that trade off.
Easy to pay: When you get TPD through your super, the premium is deducted from your super balance, not your regular take home income. This can be great if you prefer an ‘out of sight, out of mind’ approach but it will ultimately deduct from your retirement savings.
Fewer health checks: TPD through super requires far fewer health checks, and in some cases, no health checks at all. This can be a great option for those with higher risk profiles, like smokers, who may be denied insurance from other direct providers.
Cons
Limited cover: TPD through super typically has lower benefit limits.
Cover can end: When you get TPD through your super, it will usually end at age 65 and sourcing cover through other means at that age can be tricky.
Reduces super balance: Because your premiums are deducted from your super balance, this is ultimately dipping into your retirement fund.
How is TPD insurance held in super different to outside super?
TPD inside super typically has more restrictive benefits than a policy outside of super. Here are some key differences:
The payout. An insurance payout outside of super gets paid directly to you, but cover inside super gets added to your super balance
Expiry age. TPD cover in super usually ends at age 65 whereas cover outside generally continues as long as you pay the premium
Default cover. Insurance in super usually means you're automatically accepted while acceptance outside of super could be tricky if you have pre-existing health conditions or a high-risk job
Stricter criteria. TPD in super is only available as "any occupation" (read more on this below). Essentially, it means you'll only be eligible for a benefit if you're unable to work again in any occupation suited to your experience, education or training versus your "own occupation" available outside of super.
Claims acceptance. According to claims data from the Australian Prudential Regulation Authority (APRA), TPD through super has a higher average claims acceptance rate of 92.3%, compared to 83.5% for TPD bought via a broker or financial adviser.
FAQs
Your premiums are usually tax deductible when held inside super. With TPD insurance cover though, premiums are subject to different deductions depending on how the TPD insurance definition meets the "disability superannuation benefit" definition set out by the government's Tax Act. However, unless you hold "own occupation" TPD insurance, you should find it is 100% deductible because "any occupation" meets this disability definition.
Yes, it's perfectly acceptable to have multiple TPD policies. Many people take out a standalone policy to supplement their super one for added peace of mind.
Your super provider will be able to tell you if you have TPD through your super. You can give them a call and ask or you should be able to log in and view your policy. Alternatively, you can check the product disclosure statement (PDS) on their website.
Generally TPD payouts won't impact your Centrelink payments, particularly if that insurance is held within super and you are under pension age. However, a TPD payout is a form of income and you should always report any changes in circumstances to Centrelink and seek advice from it directly.
In some cases, it can be, but not always. It’s best to check with your super provider.
Gary Ross Hunter was an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio
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Gary Ross has written 648 Finder guides across topics including:
Peta Taylor is a publisher at Finder, working across all of insurance. She's been analysing product disclosure statements and publishing articles for over 2 years. Peta is passionate about demystifying complex insurance products to help users make well educated decisions with confidence. Peta is part of Finder's insurance awards team and works alongside editorial and insights experts to bring users the best insurance products every year. See full bio
Any occupation cover and own occupation cover are two types of cover that apply to Total and Permanent Disability Insurance (TPD) and Income Protection Insurance
Is TPD insurance tax-deductible? Do I need to pay tax if I receive a payout? Find out how TPD insurance is treated.
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