Insurance FAQs

Question 1

What is life insurance and how does it work in Australia?

Accepted Answer

**Life insurance pays a lump sum to your nominated beneficiaries if you die, and lets you advance the same benefit early if you are diagnosed with a terminal illness.** The contract is between you and a life insurer regulated by APRA and ASIC.

In Australia, all retail life insurance contracts are governed by the Life Insurance Act 1995 and the Insurance Contracts Act 1984. The 9 panel insurers IMFL works across are AIA, Zurich, TAL, OnePath, ClearView, NEOS, Encompass, Acenda, and Futura.

## How a policy works in practice

1. You apply for a sum insured (the dollar amount payable on death).
2. The insurer underwrites your health, occupation, and lifestyle (Topic 14 of the duty to take reasonable care, Insurance Contracts Act s20B).
3. The insurer issues a Policy Schedule listing your premium, any loadings, and any exclusions.
4. You pay premiums monthly, quarterly, or annually to keep the policy in force.
5. On death, your beneficiary or estate lodges a claim with a certified death certificate and the insurer pays the sum insured.
6. If you are diagnosed with a terminal illness meeting the policy definition, you can claim the same lump sum while still alive. Paying one cancels the other.

## Where each panel insurer documents the death and terminal illness benefit

- **AIA Priority Protection PDS** (Version 32, 9 November 2025), Section 2.1: pays a lump sum equal to the Life Cover Sum Insured on death; Terminal Illness Benefit advances the same Sum Insured.
- **Zurich Wealth Protection PDS** (1 November 2025), Death cover section: pays a lump sum on death or terminal illness.
- **TAL Accelerated Protection PDS** (12 December 2024), Section 2.1.1: Life Insurance Benefit Amount is payable on death or Terminal Illness.
- **OnePath OneCare PDS** (1 October 2025), Life Cover section: designed to provide a benefit on death or terminal illness; Death Benefit pays the Life Cover amount insured.
- **ClearView ClearChoice PDS** (13 May 2024, update 5 June 2025), Life Cover section: pays the Life Cover benefit amount on death or terminal illness diagnosis.
- **NEOS Protection PDS** (6 December 2024), Life Cover section: pays a benefit on death or terminal illness.
- **Encompass Protection PDS** (26 September 2025), Section 1 Life Cover: lump sum payment on death or terminal illness while Life Cover is in force.
- **Acenda Insurance PDS** (27 September 2025), Life Cover Benefit and Terminal Illness Benefit are the two built-in benefits.
- **Futura Protection PDS** (1 October 2025), Life Cover section: pays a benefit on death or diagnosis of a terminal illness.

## Terminal illness definitions vary across the panel

8 of the 9 panel insurers use a 24-month life-expectancy threshold. TAL is the exception at 12 months. The full per-insurer breakdown sits in the dedicated FAQ on terminal illness cover. The relevant PDS sections are: AIA; Zurich; TAL; OnePath; ClearView; Encompass; Acenda; Futura. NEOS uses the 24-month industry standard.

For super-held cover, all 9 insurers additionally require satisfaction of the SIS Act Regulation 6.01(2) terminal medical condition definition (24-month life expectancy, two medical practitioners certifying, one a specialist).

## Retail versus direct life cover

The 9 panel insurers issue retail life cover: broker-distributed and individually underwritten. Direct life cover (sold direct-to-consumer through TV ads, comparison sites, and bank or credit-card channels) is a separate distribution channel with limited underwriting at application and tighter on-claim assessment. The two are different products and should not be compared on premium alone. IMFL's panel is retail only.

## Tax treatment

Life insurance death benefits paid outside super are tax-free to the beneficiary or estate. Death benefits paid inside super to a tax dependant (spouse, child under 18, financial dependant, interdependency relationship) are tax-free under ITAA 1997 s302-195. Death benefits paid inside super to a non-tax dependant (commonly an adult child) attract tax on the taxable component, up to 17% (15% plus Medicare levy) from a taxed fund and up to 32% from an untaxed source under ITAA 1997 s302-200.

## Regulator anchor

Life insurance contracts are governed by the Life Insurance Act 1995 (Cth) and the Insurance Contracts Act 1984 (Cth). APRA prudentially regulates insurer solvency; ASIC regulates conduct and disclosure. The Life Insurance Code of Practice 2019 sets industry standards for claims handling, complaints, and plain-English communication.

Question 2

Who needs life insurance in Australia?

Accepted Answer

**Life insurance matters most for people whose death would create financial hardship for someone else.** That includes anyone with dependants, anyone carrying significant debt, and business owners whose entity depends on them.

The question is not whether you personally want a payout (you will not see it), but whether anyone relying on your income, your debt servicing, or your business stake would face a shortfall after your death.

## Common scenarios where life cover is typically considered

- **Parents with dependent children**: income to replace, school fees, mortgage, ongoing household costs.
- **Couples with shared debt**: jointly owned mortgage, vehicle loans, or guarantor commitments where one income would not cover servicing.
- **Single-income households**: one earner supporting a partner, parents, or extended family.
- **Business owners and partners**: key person cover for the business and buy/sell cover for ownership succession.
- **Self-employed and contractors**: no employer-provided cover, no group salary continuance default.
- **People with elderly parents or financially dependent siblings**: where the deceased's contribution is the household's safety net.
- **People near retirement with debts still outstanding**: mortgage balance, investment property leverage, business loans.

## Where life cover is less critical

- **Single people with no dependants and no debt**: the financial-hardship test is not met. Funeral cover (a small lump sum to cover final expenses) may suffice.
- **Retirees with paid-off mortgages, grown children, and adequate retirement savings**: the income-replacement need is gone. Final-expense cover may be enough.
- **High-net-worth individuals whose estate could absorb any debt**: liquidity is the question, not need.

## Sum insured: what to think about

The panel does not impose a personal-circumstances formula. Common considerations adviser conversations cover:

1. Outstanding mortgage balance
2. Other debts (vehicle loans, business loans, personal loans, credit cards)
3. Years of income replacement required (commonly 5 to 15 years depending on dependant ages)
4. Children's future education costs
5. Funeral and immediate expenses (commonly $10,000 to $25,000)
6. Less: existing savings, super death benefits, and any group cover already in place

The outcome is illustrative, not personal advice. The Life Insurance Act and the Insurance Contracts Act do not specify a sum-insured formula; insurers apply financial underwriting at application to confirm the sum insured is justifiable against your income, debts, and household responsibilities.

## Panel sum insured limits

- **AIA Priority Protection PDS** (Version 32, 9 November 2025), Section 2.1.1: no stated maximum; subject to financial underwriting.
- **Zurich Wealth Protection PDS** (1 November 2025), adviser guide: subject to individual assessment.
- **TAL Accelerated Protection PDS** (12 December 2024), adviser guide: any financially justifiable amount.
- **OnePath OneCare PDS** (1 October 2025), adviser guide: subject to individual circumstances.
- **ClearView ClearChoice PDS** (13 May 2024, update 5 June 2025): subject to financial underwriting.
- **NEOS Protection PDS** (6 December 2024), adviser guide: $5,000,000 cap at commencement and over the life of the plan.
- **Encompass Protection PDS** (26 September 2025), Section 1 Life Cover: $7,000,000 maximum.
- **Acenda Insurance PDS** (27 September 2025): no general maximum; special terms apply above $15 million.
- **Futura Protection PDS** (1 October 2025), adviser guide: $15,000,000 maximum.

## When to review your cover

Life events that typically prompt a review:

- Marriage or de facto relationship change
- Birth or adoption of a child
- Property purchase or significant refinance
- Career change with material income change
- Business ownership change (founding, partnership, exit)
- Children becoming financially independent
- Final mortgage payoff
- Approaching retirement

Several panel insurers offer a Future Insurability or Future Increase Benefit that lets you raise the sum insured at specified life events without further medical evidence, typically up to age 55.

## Regulator anchor

The brokerage provides general advice only. ASIC's MoneySmart at moneysmart.gov.au has consumer-level guidance on how to think about life cover needs. Your specific circumstances may warrant personal advice from a licensed financial adviser who can prepare a Statement of Advice. The information above is illustrative and based on the Life Insurance Act 1995 and Insurance Contracts Act 1984 framework that applies to all 9 panel insurers.

Question 3

What is TPD (Total and Permanent Disability) insurance?

Accepted Answer

**[TPD insurance](/glossary/insurance-types/tpd-insurance) pays a single tax-free lump sum if illness or injury makes returning to work unlikely.** It is not a monthly income, and it pays only once.

Every retail TPD policy on IMFL's panel uses the same three-month qualifying test. You stop work, treatment runs for three months, and at the end the insurer applies a permanence test against your policy's definition. The panel is AIA, Zurich, TAL, OnePath, ClearView, NEOS, Encompass, Acenda and Futura.

## What TPD pays for

The lump sum is capital, not income replacement. On the claim file it typically funds:

- Mortgage payout and personal debt.
- Home and vehicle modifications (ramps, bathroom changes, wheelchair-accessible car).
- Care, therapy and rehabilitation not covered by Medicare, NDIS or private health.
- Lost future earnings to planned retirement.
- A capital reserve for longer-term cost of living with a permanent impairment.

The Zurich Cost of Care research is the most commonly cited Australian benchmark for sizing these figures. For a fuller framework on sizing cover, see [how much TPD insurance coverage do I need](/faqs/tpd-insurance/how-much-tpd-insurance-coverage-do-i-need).

## How TPD is sold in Australia

Three channels, structurally different:

- **Retail.** Sold by a broker under one of the nine panel insurers' PDSs. Medically underwritten at application. Definitions locked. [Guaranteed renewable](/glossary/policy-terms/guaranteed-renewable) for the life of the policy.
- **Inside super (retail).** The same retail PDS, owned by a super trustee. Premiums come out of your super balance. The benefit is taxed under super rules on payout.
- **Group inside super (default).** Bulk cover that a super fund's chosen insurer writes for all members. The trustee, not the member, owns the contract. Definitions and sum insured can change at master-policy renewal.
- **Direct.** Sold without a broker by insurer-owned consumer brands (NobleOak, Real, AAMI, others). Shorter PDS definitions. NOT on IMFL's retail panel.

For more on the channel split see [how TPD insurance differs across the panel](/faqs/tpd-insurance/how-does-tpd-insurance-differ-across-the-panel-of-australian-insurers) and [how TPD insurance works with superannuation](/faqs/tpd-insurance/how-does-tpd-insurance-work-with-superannuation).

## The three-limb claim test

Every panel PDS uses the same three limbs for an Own Occupation or Any Occupation TPD claim. The life insured must:

1. Be absent from work for three consecutive months.
2. Have undergone all reasonable and appropriate treatment and rehabilitation.
3. At the end of those three months, be unlikely ever again to engage in the relevant occupation.

The first limb is a hard gate. The second prevents claims that refuse standard treatment. The third is the forward-looking medical opinion the assessor must reach.

See [what does 'total' and 'permanent' actually mean in TPD claims](/faqs/tpd-insurance/what-does-total-and-permanent-actually-mean-in-tpd-claims) for the full breakdown of the three limbs and the supplementary branches that bypass the three-month wait (loss of limbs, loss of sight, 25% whole-person impairment, paralysis, Activities of Daily Living).

## Where each panel insurer defines TPD

The core wording is substantially equivalent across the panel. PDS source citations:

- **TAL Accelerated Protection**: PDS 12 December 2024, Section 9 Definitions, page 88.
- **AIA Priority Protection**: PDS 9 November 2025, Section 12.1, page 221.
- **Zurich Wealth Protection**: PDS 1 November 2025, Definitions section.
- **OnePath OneCare**: PDS 1 October 2025, pages 32 to 33.
- **NEOS Protection**: PDS 6 December 2024, page 67.
- **ClearView ClearChoice**: PDS May 2024 (update effective 5 June 2025), pages 40 to 41.
- **Encompass Protection**: PDS 26 September 2025, pages 16 to 17.
- **Acenda Insurance**: PDS 27 September 2025, page 19.
- **Futura Protection**: PDS 1 October 2025, pages 21 to 24.

## Why TPD usually sits next to Life cover

Most retail TPD is sold attached to [Life cover](/glossary/insurance-types/life-insurance). Two structures:

- **Linked.** A TPD claim reduces the Life cover by the same amount. Lower premium, but a TPD payout leaves less for the family if the life insured later dies.
- **Standalone.** Separate sums insured for TPD and Life. Higher premium, but the Life cover survives a TPD claim.

See [the difference between linked and standalone TPD insurance](/faqs/tpd-insurance/what-is-the-difference-between-linked-and-standalone-tpd-insurance).

TPD does not replace [income protection](/glossary/insurance-types/income-protection-insurance) or [trauma insurance](/glossary/insurance-types/trauma-insurance). The three covers solve different problems. The comparison sits in [how TPD insurance differs from other types of insurance cover](/faqs/tpd-insurance/how-does-tpd-insurance-differ-from-other-types-of-insurance-cover).

Question 4

What's the difference between 'Own Occupation' and 'Any Occupation' TPD definitions?

Accepted Answer

**[Own Occupation TPD](/glossary/insurance-types/own-occupation-tpd) pays if you can never return to your specific job. [Any Occupation TPD](/glossary/insurance-types/any-occupation-tpd) pays only if you can never return to any job you are reasonably suited to.** Own Occupation is the easier test and costs more.

Both definitions are available on retail TPD across IMFL's panel of nine insurers. One structural caveat: the Own Occupation component must sit outside super.

## The two definitions in plain words

Worked example: a surveyor injures their back and can no longer do site work, but could retrain into a desk role.

- **Own Occupation.** The surveyor meets the test. The insurer asks whether you are unlikely ever again to engage in the trade, profession or type of work you were doing immediately before disability.
- **Any Occupation.** The surveyor generally fails the test. The insurer asks whether you are unlikely ever again to engage in any occupation for which you are reasonably suited by education, training or experience.

## Why Own Occupation must sit outside super

The constraint is regulatory, not pricing. Under Superannuation Industry (Supervision) Regulation 4.07D (SIS Reg 4.07D), insurance held inside a super fund (acquired on or after 1 July 2014) must align with a super condition of release.

The release condition that lines up with TPD is **Permanent Incapacity** under SIS Regulation 6.01(2). It uses the "any occupation" test. The trustee must be reasonably satisfied that the member is unlikely, because of ill-health, ever to engage in gainful employment for which they are reasonably qualified by education, training or experience.

In practice:

- TPD held inside super is ordinarily Any Occupation only.
- You can still buy an Own Occupation upgrade with super money, using a split policy.

The shorthand is correct: "Own Occupation through a retail policy is structured outside super as a split rider funded personally". It is NOT correct to say "Own Occupation is not available with super money".

## How the split policy works

The Any Occupation TPD component sits inside super. The trustee owns it. Premiums are paid from super. The benefit releases through the trustee under SIS 6.01(2).

The Own Occupation uplift sits as a smaller separate rider outside super. You pay for it personally. The Own Occ component is generally the smaller portion of total premium.

Panel insurers each name the split design differently:

- **Acenda**: TPD Optimiser (Acenda Insurance PDS 27 September 2025, page 19).
- **ClearView**: TPD Super Solutions / flexi-linked TPD (ClearView ClearChoice PDS, page 40).
- **OnePath**: SuperLink arrangements (OnePath OneCare PDS 1 October 2025, page 33).
- **AIA, Zurich, TAL, NEOS, Encompass, Futura**: equivalent split designs on their retail products.

## Where each panel insurer defines the two tests

The core wording is consistent across the panel. PDS source citations:

- **TAL Accelerated Protection**: PDS 12 December 2024, Section 9 Definitions, page 88. Own Occupation requires three consecutive months not working in Own Occupation, then incapacity unlikely to ever permit return. Any Occupation uses the same three-month absence, with incapacity unlikely to ever permit work paying more than 25% of last 12 months' earnings.
- **AIA Priority Protection**: PDS 9 November 2025, Section 12.1, page 221. Identical structure. Own Occupation references the trades, professions or types of work the life insured was last engaged in. Any Occupation references occupations reasonably suited by education, training or experience.
- **OnePath OneCare**: PDS 1 October 2025, pages 32 to 33. Identical three-month qualifying absence and reasonable treatment requirement. Includes a Non-working TPD conversion at the policy anniversary when the life insured is 65 (subject to a continuation request for white-collar occupations).
- **ClearView ClearChoice**: PDS May 2024 (with update effective 5 June 2025), pages 40 to 41. If the life insured has been unemployed or on parental or sabbatical leave for more than 12 months at the time the sickness or injury occurs, the assessment defaults to Any Occupation.
- **NEOS Protection**: PDS 6 December 2024, page 67.
- **Encompass Protection**: PDS 26 September 2025, pages 16 to 17.
- **Acenda Insurance**: PDS 27 September 2025, page 19.
- **Futura Protection**: PDS 1 October 2025, pages 21 to 24.

The last four use substantially equivalent definitions.

## Premium impact

Own Occupation premiums are higher than Any Occupation for the same sum insured, age and occupation category. The lower claim threshold produces a higher expected payout. The Acenda PDS states plainly that "you'll be charged a higher premium if you choose Own Occupation".

The exact uplift varies by occupation category. Own Occupation is also restricted to certain categories. The AIA Priority Protection Adviser Guide (10 November 2025) restricts Own Occupation to specific professional and white-collar codes (A1 to A4, C1, plus medical category M).

## How to decide

The trade-off is cost against claim probability. Common factors that lead clients to discuss Own Occupation:

- A highly specialised occupation where retraining into any other role would represent a major income loss.
- A long planned working life ahead, where the cumulative claim-probability uplift is meaningful.
- Sufficient outside-super income to fund the Own Occ rider personally.

For the broader cost picture see [how TPD premiums are calculated](/faqs/tpd-insurance/how-are-tpd-insurance-premiums-calculated). For the structural rules on holding cover in both places see [can I have TPD insurance both inside and outside superannuation](/faqs/tpd-insurance/can-i-have-tpd-insurance-both-inside-and-outside-superannuation). For the broader retail-vs-super choice see the [retail vs super life insurance guide](/guides/retail-vs-super-life-insurance).

Question 5

What is trauma insurance and how does it work?

Accepted Answer

**Trauma cover (also called Critical Illness Cover) pays a tax-free lump sum if you are diagnosed with a defined serious medical condition such as cancer, heart attack, or stroke.** The payment is triggered by diagnosis, not by death (life cover) or by permanent inability to work (TPD).

You can claim trauma cover and still return to work. The lump sum can be used for any purpose: medical bills not covered by Medicare or private health, mortgage repayments, home modifications, household income during recovery, or career retraining. IMFL's panel of 9 retail insurers (AIA, Zurich, TAL, OnePath, ClearView, NEOS, Encompass, Acenda, Futura) each issue a version of this cover, though the product names differ.

## How a trauma claim works in practice

1. You apply for a sum insured (the lump sum payable on diagnosis).
2. The insurer underwrites your health, occupation, and lifestyle under the Insurance Contracts Act 1984 s20B duty to take reasonable care.
3. The insurer issues a Policy Schedule listing your premium, the sum insured, and any loadings or exclusions.
4. You pay premiums monthly, quarterly, or annually to keep cover in force.
5. If you are later diagnosed with a listed Critical Illness Event that meets the PDS definition (including any severity threshold), you lodge a claim with medical evidence.
6. You must survive the 14-day survival period after diagnosis.
7. Any 90-day qualifying period (typically applied to cancer, heart attack, and stroke from policy commencement) must already have ended.
8. The insurer pays the lump sum into your nominated bank account.

## Product names across the panel

Only Zurich and OnePath use the word "Trauma" in their PDS section titles. The other panel insurers call this cover Crisis Recovery or Critical Illness Cover. Public-facing prose uses Trauma cover (or Trauma / Critical Illness) interchangeably.

| Insurer | Product name | Tiers |
|---|---|---|
| AIA | Crisis Recovery | Stand Alone or Rider Benefit |
| Zurich | Trauma cover | Trauma, Trauma Plus |
| TAL | Critical Illness Insurance | Standard, Premier |
| OnePath | Trauma Cover | Comprehensive, Severity |
| ClearView | Trauma Cover | Standard, Severe Events |
| NEOS | Critical Illness Cover | Single tier |
| Encompass | Critical Illness Cover | Standard, Plus |
| Acenda | Critical Illness insurance | Standard, Plus |
| Futura | Critical Illness Cover | Single tier |

## Where the panel insurers document the trigger event

- **AIA Priority Protection PDS** (Version 32, 9 November 2025), Section 4, page 59: pays Crisis Recovery Sum Insured on occurrence of a listed Crisis Event from Cancer, Coronary, or Other Serious Crisis Events categories.
- **Zurich Wealth Protection PDS** (1 November 2025), Trauma cover section: pays on a defined Trauma condition listed in the PDS and confirmed by evidence.
- **TAL Accelerated Protection PDS** (12 December 2024), Section 2.3.1: pays the Benefit Amount if the Life Insured suffers a Critical Illness Event listed in the table.
- **OnePath OneCare PDS** (1 October 2025), Trauma Cover section: pays a benefit for various trauma events such as cancer, terminal illness, and death triggers.
- **ClearView ClearChoice PDS** (13 May 2024, update 5 June 2025), Trauma Cover at a glance: pays the benefit amount if the life insured is diagnosed with a specified trauma condition.
- **NEOS Protection PDS** (6 December 2024), Critical Illness Cover section: lump sum payment if diagnosed with a specified Critical Illness Event.
- **Encompass Protection PDS** (26 September 2025), Critical Illness Cover section: lump sum payment if you suffer from one of the specified critical illness events.
- **Acenda Insurance PDS** (27 September 2025), Critical Illness insurance section, pages 22-26: pays a lump sum if diagnosed with a non-surgical Critical Illness event (also called trauma insurance in the PDS).
- **Futura Protection PDS** (1 October 2025), Critical Illness Cover section: lump sum on a specified Critical Illness Event, Partial Critical Illness Event, or related listed condition.

## Tax treatment

The lump sum is generally tax-free under ITAA 1997 s118-37 (CGT exemption for life-policy proceeds to the original beneficial owner). Trauma premiums are generally NOT tax-deductible in personal name (ATO TR 95/35 treats them as capital), which is the opposite of Income Protection.

## Regulator anchor

Trauma cover is governed by the Life Insurance Act 1995 (Cth) and the Insurance Contracts Act 1984 (Cth). The Life Insurance Code of Practice 2019 sets industry-standard definitions for the first $2 million of cover and binds the panel on claim-handling timeframes. APRA regulates insurer solvency; ASIC regulates conduct and disclosure. AFCA at afca.org.au is the external dispute pathway.

Question 6

How is trauma insurance different from life insurance and TPD insurance?

Accepted Answer

**Life cover pays on death. TPD pays on permanent inability to work. Trauma cover pays on diagnosis of a defined critical illness, regardless of whether you can still work.** The three covers are commonly held together because they protect against three different financial events.

The structural distinction matters because the claim trigger drives when (and whether) you ever see a payout. A cancer survivor who returns to work may receive a Trauma payout without ever triggering Life or TPD. A tradesperson permanently disabled by a back injury may trigger TPD without ever triggering Trauma (because musculoskeletal injuries are typically not listed Critical Illness Events).

## Side-by-side comparison

| Feature | Life cover | TPD cover | Trauma cover |
|---|---|---|---|
| Trigger | Death or terminal illness | Permanent inability to work | Diagnosis of a listed Critical Illness Event |
| You are alive at payout | No (except terminal illness advance) | Yes | Yes |
| Payment shape | Lump sum | Lump sum | Lump sum |
| Survival period | None (terminal illness varies) | None | 14 days after diagnosis (panel standard) |
| Qualifying period from policy start | 13-month suicide exclusion | None standard | 90 days for cancer, heart attack, stroke (panel standard) |
| Held inside super | Yes | Yes | Generally no (SIS Reg 4.07D from 1 July 2014) |
| Number of claims per policy | One | One (typically) | Once per condition family; Reinstatement Option may apply |
| Tax of premiums outside super | Not deductible | Not deductible | Not deductible (ATO TR 95/35) |
| Tax of benefits outside super | Tax-free to beneficiary or estate | Generally tax-free | Tax-free under ITAA 1997 s118-37 |

## Why the super distinction exists

Since 1 July 2014, the SIS Regulations (Reg 4.07D, made under SIS Act 1993 s62 sole-purpose test) have prohibited new Trauma policies being held inside super. The reason: a Trauma claim can be paid while the insured is still working and earning, which does not meet a Condition of Release for accessing super. Life cover and TPD remain permissible inside super because death and permanent incapacity are Conditions of Release.

Pre-1 July 2014 super-held Trauma policies are grandfathered; existing ones may continue, but no new super-held Trauma policies may commence. The panel insurers confirm this explicitly:

- **ClearView ClearChoice PDS** (13 May 2024, update 5 June 2025), Trauma Cover at a glance: Trauma Cover is not available inside super.
- **Encompass Protection PDS** (26 September 2025): Critical Illness Cover is not available inside super.
- **TAL Accelerated Protection PDS** (12 December 2024), Section 2.3: Critical Illness Insurance cannot be structured through superannuation.
- **Zurich Wealth Protection PDS** (1 November 2025): trauma insurance cannot be held in superannuation because most trauma events would not satisfy a Condition of Release.
- **AIA, OnePath, NEOS, Acenda, Futura**: same outside-super structure; product designs route Trauma cover outside super.

## OnePath SuperLink (special structure)

OnePath OneCare offers SuperLink Trauma: Trauma Cover is held outside super, but linked to a Life or TPD Cover held inside super, so super-funded premium contributions can effectively pay for the linked cover. The Trauma itself remains outside super; the link is structural, not ownership.

## Why people commonly hold all three

1. **Life cover** protects the people who depend on your income after you die.
2. **TPD** protects you and your household if you survive but cannot work again.
3. **Trauma** protects against the short-term cash-flow shock of a serious diagnosis: medical bills, mortgage buffer, time off work for recovery.

A single event can trigger all three. For example, an advanced stage-4 cancer diagnosis can trigger Trauma (at diagnosis), Life cover terminal illness benefit (at the 24-month life-expectancy point, or 12 months for TAL), and TPD (if treatment leaves permanent inability to work). Linked or attached structures cap the combined exposure across the three covers.

## Regulator anchor

All three covers are governed by the Life Insurance Act 1995 and the Insurance Contracts Act 1984. The SIS Act 1993 and SIS Regulations (Reg 4.07D) govern the in-super restriction on Trauma. The Life Insurance Code of Practice 2019 binds all 9 panel insurers on claim-handling timeframes. AFCA at afca.org.au is the external dispute pathway.

Question 7

What is Income Protection Insurance and how does it work?

Accepted Answer

**Income Protection (IP) pays a monthly benefit when illness or injury stops you working.** It replaces up to 70% of pre-disability income, after a chosen waiting period, for a set benefit period or until you recover.

Every retail IP contract on IMFL's panel was issued after APRA's October 2021 reforms, so the 70% cap, indemnity-only structure, and 24-month income reset apply across the board. The panel is AIA, Zurich, TAL, OnePath, ClearView, NEOS, Encompass, Acenda, and Futura.

## How the mechanics fit together

1. You pick a waiting period (the gap between disablement and first payment).
2. You pick a benefit period (the maximum payment runway: 2 years, 5 years, or to age 65).
3. Illness or injury occurs. You stop work and start treatment.
4. After the waiting period ends and the insurer accepts the claim, monthly benefits begin.
5. Payments continue until you recover, the benefit period ends, or the policy's other limits engage (such as the mental-illness sub-limit if relevant).

## Where each panel insurer documents the 70% cap

- **AIA Priority Protection PDS** (Version 32, 9 November 2025), Section 5.1.2 (Built-in Benefits): 70% of monthly Pre-disablement Income at the time of becoming Totally or Partially Disabled.
- **TAL Accelerated Protection PDS** (12 December 2024), Section 2.6: 70% of the first $25,000 per month ($300,000 per annum) of your Earnings.
- **Zurich Wealth Protection PDS** (1 November 2025), Income Protection section: You can insure up to 70%, tiered above $240,000.
- **OnePath OneCare PDS** (October 2025), Income Secure Cover: 70% of the first $300,000 of annual income as at the Cover start date.
- **ClearView ClearChoice PDS** (13 May 2024, update 5 June 2025), Income Protection Flex (IP70): 70% of your pre-disability earnings.
- **NEOS Protection PDS** (6 December 2024), Income Support Cover: 70% of the first $25,000 per month of your regular income.
- **Encompass Protection PDS** (26 September 2025), Income Protection Cover: 70% of your first $240,000 of annual pre-disability earnings, divided by 12.
- **Acenda Insurance PDS** (27 September 2025), Income Protection: 70% of your Earnings Before Disability (then 20% on the next band for 6 months).
- **Futura Protection PDS** (1 October 2025), Income Protection Cover: 70% of the first $25,000 per month of your regular income.

## What IP is not

IP is not a lump-sum product. TPD and Trauma pay once. IP pays monthly, and only while you remain unable to work under the policy's definition. IP is also not redundancy cover: you must be unable to work due to illness or injury, not because you have lost your job.

## Regulator anchor

The 70% cap, the 24-month income reset, and the indemnity-only structure all flow from APRA's Information Paper *Individual Disability Income Insurance*, October 2021. The Insurance Contracts Act 1984 governs the contract itself.

Question 8

What percentage of my income can I insure with Income Protection?

Accepted Answer

**Income Protection replaces up to 70% of your gross pre-disability income.** APRA's October 2021 Individual Disability Income Insurance (IDII) reforms set this cap for every new retail policy issued by panel insurers.

## Why the cap exists

APRA introduced the 70% cap to keep a financial incentive to return to work. The rule prevents insurers from putting you in a better post-tax position when disabled than when working. The full framework sits in the APRA Information Paper *Individual Disability Income Insurance* (October 2021), published at apra.gov.au.

The 70% applies to gross income before tax. Benefits paid outside super are taxable as ordinary income, and premiums paid from personal cash are generally deductible under ITAA 1997 s8-1 (see ATO TR 95/35).

## How each panel insurer applies the cap

The headline rate is 70% across all 9 panel insurers, but most apply a tiered (sliding-scale) structure to high earners. Income above a threshold is replaced at a lower rate, again to preserve the return-to-work incentive.

| Insurer | Replacement structure | PDS reference |
|---------|----------------------|---------------|
| **AIA** | 70% of first $20,000 monthly pre-disablement income, then tiered above | Income Protection CORE, Section 5.1.2 (PDS 9 Nov 2025) |
| **TAL** | 70% of first $25,000 per month ($300,000 p.a.) | Section 2.6 (PDS 12 Dec 2024) |
| **Zurich** | 70% of first $240,000 p.a., 50% of next $60,000 | Section: Income protection (PDS 1 Nov 2025) |
| **OnePath** | 70% of first $300,000 of annual income at Cover start | Income Secure Cover (PDS Oct 2025) |
| **ClearView** | 70% pre-disability earnings (Income Protection Flex IP70); IP60 variant available | Income Protection, Section (PDS 13 May 2024, Update 5 Jun 2025) |
| **NEOS** | 70% of first $25,000 per month of regular income | Income Support Cover (PDS 6 Dec 2024) |
| **Encompass** | 70% of first $240,000 p.a. pre-disability earnings, divided by 12 | Income Protection cover (PDS 26 Sep 2025) |
| **Acenda** | 70% of first $240,000 Earnings Before Disability; 20% next band for 6 months only | Income Replacement Ratio Amount (PDS 27 Sep 2025) |
| **Futura** | 70% of first $25,000 per month of regular income | Income Protection Cover (PDS 1 Oct 2025) |

## What counts as insurable income

For PAYG employees, base salary plus regular bonuses, commissions and overtime averaged over 12 months is the usual basis. Investment income, rental income, and one-off windfalls are generally excluded.

For self-employed earners, insurable income is net business income after deductible business expenses but before personal income tax. The exact definition varies by insurer, so check the PDS for the version that applies to your income mix.

## What this means in practice

If you earn $120,000 gross, the maximum monthly benefit is $7,000 (70% of $10,000). Super-fund IP (salary continuance) sits inside the same APRA framework and is also capped at 70%.

Pre-October 2021 policies sometimes carried higher replacement ratios (up to 75% or more) under the old framework. Those legacy contracts may continue under their original terms, but new policies cannot match them. This is general information, not personal advice.

Question 9

What is key person insurance and how does it work?

Accepted Answer

**Key person insurance is a business-owned policy that pays the business if a critical employee or owner dies, becomes disabled, or suffers a critical illness.** The proceeds fund recruitment, replace lost revenue, or repay debt.

Key person cover is a use case, not a standalone product. The business buys Life, TPD, Trauma (Critical Illness), Income Protection, or Business Expenses cover on the life of a key employee or director. The business is the policy owner and the beneficiary.

## How the structure works in practice

1. The business identifies a key person whose loss would cause material financial damage.
2. The business takes out cover on that person's life (with the person's consent for medical disclosure).
3. The business pays the premium from its own cash flow.
4. If the insured event occurs, proceeds are paid to the business.
5. The business applies the proceeds to its documented purpose: revenue replacement, capital protection, or buy-out funding.

## How each panel insurer supports key person structuring

| Insurer | Mechanism |
|---|---|
| AIA | Business Safeguard Forward Underwriting (PDS Section 8.12), $10M max |
| Acenda | Business Safeguard Option, $15M Life max (PDS pages 56 to 58) |
| Zurich | Business cover events plus Zurich Business Expenses with key person replacement variant |
| TAL | Business Insurance Option under Guaranteed Future Insurability Benefit |
| OnePath | Future Insurability business events (PDS) |
| ClearView | Future Increase Benefit business events |
| NEOS | Future Increase Benefit business events ($200,000 per event cap) |
| Encompass | Future Increase Benefit with explicit 'revenue protection (key person)' wording |
| Futura | Future Increase Benefit business events ($200,000 per event cap) |

See **AIA Priority Protection PDS** (Version 32, 9 November 2025), Section 8.12, page 157; **Acenda Insurance PDS** (27 September 2025), pages 56 to 58; **Zurich Wealth Protection PDS** (1 November 2025), Business Expenses section; **TAL Accelerated Protection PDS** (12 December 2024), Guaranteed Future Insurability Benefit section.

## What key person cover is not

Key person cover is not the same as personal life insurance, salary continuance, or workers' compensation. The owner is the business, not the individual. Proceeds are paid to the business, not the individual's family. If the key person leaves, the business decides whether to continue, transfer, or cancel cover.

## Why purpose documentation matters

Australian tax treatment turns on the purpose of the cover, not the legal form. The Commissioner of Taxation's view in **ATO Taxation Ruling TR 2009/2** sets out the framework: revenue purpose cover (replacing lost income) carries deductible premiums and assessable proceeds; capital purpose cover (recruitment funding, debt repayment, equity buyout) carries non-deductible premiums and proceeds that are generally exempt under **ITAA 1997 s118-37(1)(a)**.

## Regulatory anchors

Key person policy contracts sit under the **Life Insurance Act 1995 (Cth)** and the **Insurance Contracts Act 1984 (Cth)**. Premium and proceeds tax treatment turns on **ATO TR 2009/2**, **ATO TR 95/35**, **ATO TR 85/36**, **ITAA 1997 s8-1**, and **ITAA 1997 s118-37(1)(a)**.

This is general advice only. Tax treatment is complex and depends on business structure (sole trader, partnership, company, trust), cover purpose, and policy ownership. Discuss the structure with a registered tax agent and a licensed insurance adviser before applying.

Question 10

Who qualifies as a 'key person' in a business?

Accepted Answer

**A key person is an employee, director, or business owner whose death, disability, or critical illness would cause material financial loss to the business.** The qualification turns on financial impact, not on job title.

The **Australian Taxation Office** describes a key person in **ATO Taxation Ruling TR 2009/2** as one whose loss would result in a significant loss of profits during the continuation of business operations. Panel insurers apply a similar test at financial underwriting.

## Common categories of key person

- **Founders and business owners** whose vision, client relationships, or technical expertise drive the business.
- **Company directors** with strategic control or external-relationship responsibility.
- **Partners in a partnership** whose share of profit reflects active contribution.
- **Senior sales staff** generating a material share of revenue (typically 20% or more attributable to one person).
- **Project managers or technical specialists** holding licences, certifications, or IP critical to operations.
- **Skilled tradespeople** in small businesses where the licence or qualification rests with the individual.

## What the financial test looks like

Insurers underwriting key person cover assess:

- The key person's contribution to gross revenue.
- The proportion of net profit fairly attributable to the individual.
- Time and cost required to recruit and train a replacement.
- Whether the person holds business debt as guarantor or has signed personal guarantees.
- Whether the person is named in client contracts, supplier agreements, or regulatory licences.

See **AIA Priority Protection PDS** (Version 32, 9 November 2025), Section 8.12 (Business Safeguard Forward Underwriting), which requires `a written re-evaluation of your value to the business from a qualified accountant or valuer` for the key person business insurance event.

## Panel insurer definitions

**Acenda Insurance PDS** (27 September 2025), Glossary, defines `Key Person` as `an employee or business owner without whose knowledge or expertise the business would suffer material financial loss`. Acenda also defines `Revenue Protection (Key Person) insurance` separately as `insurance to protect a business or employer against financial loss that may result from the loss of service of a key person due to their death, sickness or injury`.

**OnePath OneCare PDS** (October 2025), Future Insurability section, requires the life insured to be `crucial to the operation of the business` and that the business `would suffer a financial loss if the life insured died or suffered disability`.

**Encompass Protection PDS** (26 September 2025) explicitly references `revenue protection (key person) insurance if you're considered as such in the business` in its business-event trigger.

## Who does not qualify

- **Clients, suppliers, or other external parties.** The insurable interest must rest with the business, not external relationships.
- **Junior employees without revenue or strategic responsibility.** A receptionist or general office worker would not typically meet the financial test.
- **Family members not actively involved.** A spouse listed on company records but not engaged operationally does not qualify.
- **Temporary contractors** without a multi-year integral relationship to revenue.

## How insurers test 'key person' status at application

At application, the underwriter expects:

- A key-person valuation report from the business's accountant or business valuer.
- 2 to 3 years of business financial statements showing the person's contribution.
- A job description and explanation of responsibilities.
- Tax returns of the business and (for owners) of the individual.

Without this documentation, the cover may be issued at smaller-than-requested sum insured or with a financial-evidence loading.

This is general advice only. Whether a specific employee or owner qualifies as a key person depends on the business's structure, the insurer's underwriting view, and the documentation provided. Discuss with a registered tax agent and a licensed insurance adviser before lodging an application.

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