Key Person Trauma (Critical Illness) cover uses the panel's standard retail Trauma products, structured with the business as policy owner and beneficiary; all 9 panel insurers offer Trauma cover suitable for Key Person structuring. Outside-super ownership is the standard structure for new Trauma cover.
The panel is AIA, Zurich, TAL, OnePath, ClearView, NEOS, Encompass, Acenda, and Futura. Each insurer's Trauma product has its own condition list, partial-benefit structure, qualifying periods, and survival period. The product names vary; the legal mechanic is the same.
Panel Trauma products at a glance
| Insurer | Product name for Trauma / Critical Illness cover | Inside-super availability |
|---|---|---|
| AIA | Crisis Recovery (and Crisis Recovery Stand Alone) | Ordinary Plan only; no Superannuation Crisis Recovery Plan |
| Zurich | Zurich Wealth Protection Critical Illness (Trauma Plus partial-benefit option) | Outside super standard; SMSF subject to sole-purpose review |
| TAL | Critical Illness Insurance Plan (Standalone or attached to Life) | Outside super standard |
| OnePath | OneCare Trauma Cover (Comprehensive and Premier tiers) | Outside super only on the OneCare standard variant |
| ClearView | ClearChoice Trauma | Outside super only |
| NEOS | NEOS Critical Illness Cover | Outside super only |
| Encompass | Encompass Critical Illness Cover | Outside super only |
| Acenda | Acenda Critical Illness | Wrap or SMSF restricted by sole-purpose test |
| Futura | Futura Critical Illness Cover | Outside super only |
Why Trauma sits outside super for Key Person purposes
Since 1 July 2014, the SIS Act sole-purpose test in s62 has effectively barred new Trauma cover from sitting inside super, because Trauma pays on diagnosis (the member can continue to work) and does not align with the SIS conditions of release for permanent incapacity, terminal illness, or death.
The practical result for Key Person: Trauma cover should be owned by the business (company, partnership, family trust) or by the individual outside super, not by an SMSF or an APRA-regulated super fund. This holds across all 9 panel insurers.
Sources for the inside-super restriction:
- APRA Letter on Insurance through Superannuation (1 July 2014)
- SIS Act 1993 (Cth), s62 (sole-purpose test)
- SIS Regulation 6.01(2) (conditions of release)
Standard policy mechanics for business-owned Trauma
The structure typically looks like:
- Policy owner: the business (company, partnership, family trust) on the life of the key person
- Beneficiary: the policy owner receives the lump sum on a qualifying diagnosis
- Premiums: paid by the business; deductibility per ATO TR 2009/2 capital vs revenue analysis
- Survival period: typically 14 days after diagnosis before the benefit is payable across most panel Trauma products
- Qualifying period: 90 days for cancer and certain conditions; immediate cover for accident-based events
Condition list sizes per panel insurer
- AIA Crisis Recovery: extensive condition list across full and partial benefits; specific conditions per PDS Section 2.3 onwards.
- Zurich Critical Illness: PDS records the condition list with full benefit conditions and partial benefit conditions; verify in the current PDS as the list is updated periodically.
- TAL Critical Illness Insurance Plan: PDS Section 2.3 sets out the conditions.
- OnePath OneCare Trauma: Comprehensive and Premier tier condition lists per the current PDS.
- ClearView ClearChoice Trauma: PDS sets out the conditions and partial-benefit triggers.
- NEOS Critical Illness: condition list per the current PDS.
- Encompass Critical Illness: condition list per the current PDS.
- Acenda Critical Illness: condition list per the current PDS, with Business Safeguard Option providing forward-underwritten increases (Acenda Insurance PDS, pages 56-58).
- Futura Critical Illness: condition list per the current PDS.
Tax treatment of Key Person Trauma proceeds
The ATO's framework in Tax Ruling TR 2009/2 governs how Trauma proceeds are taxed:
- Capital purpose (proceeds used to fund recruitment, restructure, repay capital debt, or buy out a disabled owner): premiums are not deductible under ITAA 1997 s8-1; proceeds are generally not assessable as ordinary income, and the CGT exemption in s118-37(1)(a) typically applies where the recipient is the original beneficial owner.
- Revenue purpose (proceeds replacing business revenue that would otherwise be assessable): premiums deductible under s8-1; proceeds assessable as ordinary income.
The legal form of the policy (Trauma) is not determinative; the intended use of the proceeds is what matters under TR 2009/2. Document the purpose at inception and confirm with your accountant.
Practical use of Trauma in a Key Person package
Trauma pays on diagnosis regardless of whether the key person ultimately returns to work. This trigger is more useful for short-to-medium business disruption than TPD (which requires permanence) because:
- The key person can be diagnosed with cancer and still recover; the business receives the lump sum during treatment to fund interim management
- Heart attack or stroke triggers payment even where rehabilitation will allow return to work
- Bridge working-capital shortfalls during the key person's recovery
- Fund debt repayment while the diagnosis is being managed
- Pay for replacement specialist input during recovery
Common considerations
- Compare condition lists across the panel before selecting an insurer. Panel insurers update their Trauma definitions periodically.
- Survival periods (typically 14 days), partial-benefit structures, and reinstatement clauses vary materially.
- Trauma rates are higher than Life Cover; budget for the premium difference.
- Trauma combined with TPD provides broader business protection than Trauma alone.
- General advice only. Recommend the user engages an insurance adviser, accountant, and solicitor to coordinate the ownership structure and documented purpose.
Regulator anchor
- Life Insurance Act 1995 (Cth) for the contract
- Insurance Contracts Act 1984 (Cth) for the duty to take reasonable care (s20B) and insurer remedies (ss28-29)
- SIS Act 1993 (Cth) s62 (sole-purpose test) and SIS Regulation 6.01(2) (conditions of release) bar inside-super Trauma for new cover
- ATO TR 2009/2 (capital vs revenue purpose framework) and ITAA 1997 s8-1, s118-37(1)(a)
- Life Insurance Code of Practice 2019