Are TPD insurance benefits indexed against inflation?

Yes, if Indexation was selected at application. Indexation (also called Inflation Protection, CPI Increase, or Benefit Indexation) automatically increases the sum insured each policy anniversary in line with the Consumer Price Index, with a typical floor of 5% if CPI is lower.

The mechanic matters because most clients hold TPD cover for decades. A $500,000 sum insured loses substantial purchasing power without indexation. Every retail panel insurer offers the feature (AIA, Zurich, TAL, OnePath, ClearView, NEOS, Encompass, Acenda, Futura).

The key rule: opt-in is at application only

Indexation must be selected at application. Once a policy is in force without indexation, it generally cannot be added later. Adding it would require fresh medical underwriting and may be declined depending on age, health, and time elapsed.

You can, however, opt out of any single year's increase on the policy anniversary without losing the indexation feature for future years. Decline once and the sum insured stays flat for that year. The indexation feature remains available the following anniversary.

Per-insurer specifics

• AIA Priority Protection (PDS 9 November 2025, Section 7.6): 'Automatically increases your Sum Insured at the Policy Anniversary each year by the higher of the CPI Increase and 5%, and adjusts your premium accordingly. You can opt out of indexation on your application form or before any Policy Anniversary.'
• TAL Accelerated Protection (PDS 12 December 2024, Section 2.4.1 Inflation Protection Benefit): 'Automatically increases the Benefit Amount on the Policy anniversary by the greater of 5% and the Indexation Factor to help keep pace with inflation. Increased cover affects your premium, so you have the option to remove this benefit.'
• Zurich Wealth Protection (PDS 1 November 2025, Inflation Protection section): annual percentage change in CPI applied each policy anniversary. 'You don't have to accept CPI increases.'
• NEOS Protection (PDS 6 December 2024, page 31): 'If you don't want the Indexation Benefit to apply, you'll need to let us know within 30 days after the relevant plan anniversary. If you decline an increase, you'll not be excluded from being offered' future indexation. You can also 'request to remove the Indexation Benefit permanently from your cover at any time, however should you wish to have the Indexation Benefit restarted, we may require further information from you before agreeing to restart it.'
• Encompass Protection (PDS 26 September 2025): equivalent built-in Indexation Benefit. Decline within 30 days of the plan anniversary to skip a year.

OnePath, ClearView, Acenda and Futura carry equivalent built-in Indexation features in their PDSs.

Repeated declines

Some insurers limit how often you can decline the increase before the Indexation Benefit is permanently removed. NEOS, for example, allows individual-year declines without removal. NEOS also notes that voluntary permanent removal requires further information before restart. Other panel insurers stop offering future increases after 2 or 3 consecutive declines. Check the specific PDS for the rule that applies to your cover.

What gets indexed when you make a claim

Once a claim is admitted, the sum insured is fixed at the indexed amount at the date of disability. Indexation does not continue while a TPD claim is being assessed or after the lump sum is paid.

The benefit you receive is a single lump sum reflecting the sum insured at the moment the TPD event crystallised, not a stream of inflation-adjusted future payments.

Premium impact

Each year the sum insured increases, the premium increases too, on the stepped or level basis applicable to your cover. Premium Freeze options (offered by TAL and others) let you keep the premium flat by reducing the sum insured rather than allowing indexation to push it up.

Practical considerations

For long-dated TPD cover, declining indexation in the early years and then trying to add it back later is much harder than keeping it on from the start. The same logic applies to Life cover and Income Protection.

See how TPD premiums are calculated for the broader premium structure, and stepped versus level premiums for the underlying pricing approach.