Category: Basics
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).
| 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 |
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:
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.
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.
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.
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