A one-time payment of the full insured amount, typically paid for life insurance, TPD insurance, and trauma insurance. Unlike monthly benefits, lump sum benefits provide immediate access to the entire benefit amount.
A lump sum benefit is a single payment of the full sum insured, triggered by death, total and permanent disability, or diagnosis of a covered serious illness. It is paid once, not as ongoing instalments.
Lump sum cover suits one-off financial needs (mortgage payoff, medical treatment, home modification) rather than ongoing income replacement.
| Feature | Lump sum (Life / TPD / Trauma) | Monthly benefit (Income Protection) | |---|---|---| | Payment shape | One payment | Recurring monthly while disabled | | Trigger | Death, TPD, or trauma event | Inability to work due to illness or injury | | Tax (outside super) | Tax-free | Taxable as ordinary income | | Sum insured range | $100,000 to several million | Up to ~75% of gross income | | Best use | Capital needs: debt, medical bills, lifestyle | Cash flow: living expenses during disability |
The sum insured is fixed at application based on age, occupation, health, and the cover amount you select. Common amounts:
Lump sum benefits held inside super are payable only if a condition of release is met (death, permanent incapacity, or terminal medical condition). The fund trustee assesses the claim and pays the benefit through the super system, which affects tax outcomes for non-dependant beneficiaries. See Death Benefit Tax and Tax Component (Super).
After a heart attack, Michael receives a $250,000 lump sum from his trauma insurance. He uses $80,000 for medical expenses, $100,000 to pay off his mortgage, and invests $70,000 to supplement his income during recovery.
Sophie becomes totally and permanently disabled and receives a $750,000 TPD lump sum. She uses this to modify her home ($150,000), purchase specialist equipment ($50,000), and invests the remainder ($550,000) to generate income for her lifetime needs.
When Tom dies, his $500,000 life insurance policy pays a lump sum to his family, helping them pay off the $380,000 mortgage and providing $120,000 for education and living expenses.
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