Category: Claims
Income Protection pays a continuing monthly stream that depends on ongoing disability, while TPD and trauma pay one-off lump sums on a defined event. The structural differences shape every part of how claims are assessed, paid, and taxed.
Understanding the three product types together helps you structure cover that fits both short-term recovery and life-changing events.
| Feature | Income Protection | TPD | Trauma | |---------|-------------------|-----|--------| | Payment structure | Monthly stream | Single lump sum | Single lump sum | | Trigger | Cannot perform your occupation duties | Total and permanent disability test met | Defined medical event (cancer, heart attack, stroke, etc.) | | Maximum amount | 70% of pre-disability income (APRA cap from 1 October 2021) | Sum insured (typically up to several million) | Sum insured per event | | Ongoing evidence required | Yes, continuous | No, single assessment | No, single assessment | | Tax treatment of benefits | Assessable income (ATO TR 85/36) | Generally tax-free outside super | Generally tax-free outside super | | Tax treatment of premiums | Generally deductible outside super (ATO TR 95/35) | Generally not deductible outside super | Not deductible | | Linked benefits possible | Yes, claim IP while still holding TPD and trauma | One-time payout, cover usually ends | One-time payout per event, some benefits allow further claims |
IP is designed to replace income while you recover. TPD and trauma are designed for permanent or life-changing events. They cover different financial risks.
IP claims require updated medical certificates, sometimes Independent Medical Examinations (IMEs), and participation in reasonable rehabilitation. APRA's October 2021 reforms also introduced a two-year income reset for long-duration claims and an 'any occupation' definition switch after 24 months. See the APRA Information Paper Individual Disability Income Insurance (October 2021).
All 9 panel insurer PDSs document the 24-month reset:
TPD requires a permanent disability assessment. Trauma pays once a defined medical event is diagnosed. Both close on payout; cover usually ends or is permanently reduced.
Yes. The three products cover different risks and can be claimed in parallel. Examples:
Because IP is monthly and the others are lump sums, premiums and underwriting differ. IP underwriting focuses heavily on occupation; trauma and TPD focus on medical history.
Different products solve different problems. A well-structured cover plan typically uses IP for income continuity and lump-sum products for life-changing events. Discuss the right mix with a licensed adviser.
General advice only. Tax treatment depends on personal circumstances; consult a tax professional or the ATO.
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