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TPD insurance in super

It’s usually automatically included in your fund, but is TPD insurance in super worth it?

What you need to know

  • TPD insurance in super can be a straightforward, low barrier to entry option.
  • It could work for those looking for an affordable policy with no medical checks.
  • These policies can fall short when you need them the most. Their weaker benefits can lead to underinsurance.

Total and permanent disablement (TPD) insurance can provide you with a one-off, lump sum payment if you become permanently disabled and are unable to work again.

Some people may have it included in their super already. Here's why TPD in super might not be the best option for this important type of cover.

What is TPD insurance in super?

TPD insurance inside super is designed to pay out a benefit into your super in the event you become permanently disabled and can no longer work and earn a living.

TPD insurance in super is sometimes automatically included when you open a super account, unless you're under 25. It's referred to as "default cover".

If your super account balance is below $6,000 and you don't make regular payments into it, your super fund is now legally required to cancel this insurance.

How is TPD insurance held in super different to outside super?

TPD inside super typically has more restrictive benefits than a policy outside of super. Here are some key differences:

  • The payout. An insurance payout outside of super gets paid directly to you, but cover inside super gets added to your super balance
  • Expiry age. TPD cover in super usually ends at age 65 whereas cover outside generally continues as long as you pay the premium
  • Default cover. Insurance in super usually means you're automatically accepted while acceptance outside of super could be tricky if you have pre-existing health conditions or a high-risk job
  • Stricter criteria. TPD in super is only available as "any occupation" (read more on this below). Essentially, it means you'll only be eligible for a benefit if you're unable to work again in any occupation suited to your experience, education or training versus your "own occupation" available outside of super.

As a rule, I'd only recommend Own occupation TPD – most of our clients have highly skilled roles where a minor disablement could still leave them able bodied and capable of working, but not at their previous role or level of income. This would be devastating if you were relying on a higher income but, due to an injury or sickness, you weren't able to claim because you're not quite sick or injured enough.

Finder survey: What types of insurance do Australians have?

ResponseMaleFemale
TPD insurance16.51%12.3%
Source: Finder survey by Pure Profile of 1110 Australians, December 2023

Compare TPD insurance options outside super

1 - 6 of 24
Name Product Maximum Cover Minimum Cover Maximum Entry Age Expiry Age Stand alone or Add on policy hide
TAL TPD Insurance
3,000,000
Not stated
61
65
Standalone or Policy add-on
Choose up to $3 million in coverage. If you’re building a policy with TAL, it’s good to know there are a range of perks included with your life insurance. Examples include a counselling benefit and premium suspension cover. Plus, the option to add coverage for your kids.
Medibank TPD Insurance
$1,500,000
$50,000
60
65
Policy add-on
Secure up to $1.5 million in TPD cover by choosing Medibank. This was more than 7 other providers (out of 14) we reviewed. Medibank health members can score 10% off their life insurance premiums.
NobleOak TPD Insurance
$5,000,000
No minimum
59
75
Policy add-on
Get fully underwritten TPD cover that can be shaped in a way that takes into account your job and other circumstances. The $5 million benefit limit is – alongside RAC – the highest sum on Finder.
ahm TPD Insurance
$1,000,000
$50,000
55
65
Policy add-on
With ahm, you can add up to $1 million in TPD insurance to your policy. You can buy online and there’s no medical exam. Keep in mind that Medibank offers an extra $500k – worth considering if your needs are greater.
RAC WA TPD Insurance
$5,000,000
No minimum
59
75
Policy add-on
When you purchase RAC TPD Insurance, WA residents receive complimentary RAC membership which includes access to discounts on fuel, savings on shopping, entertainment and more. T&Cs at rac.com.au.
Real Insurance TPD Insurance
$1,000,000
$50,000
59
65
Policy add-on
Real Insurance offers up to $1 million in TPD cover. This is pretty competitive versus the market. You can also boost your cover by adding as much as $500k in critical illness insurance.
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What are the advantages of TPD insurance inside super?

Here's why TPD insurance inside super might be a good idea for you:

  • Insurance inside super is generally cheaper and means you can get cover that would ordinarily be unaffordable.
  • There is no medical underwriting when you or your employer sign ups to cover.
  • The premiums don't interfere with your bank balance, just your super.

What are the disadvantages of TPD inside super?

There are also a few reasons you might not want to get TPD inside super:

  • The premiums eat into your super balance.
  • The default cover amount may not be enough to cover all your bills and ongoing expenses.
  • "Any occupation" means you have to show you won't be able to work again in any capacity.
  • It usually ends when you turn 65 or 70 so it may not even last until when you need it, unlike a policy outside of super, which may end when you're 99 (as long as you keep meeting your premium payments).
  • If you change super funds, your cover may end.
  • The payout is paid to your super fund, rather than directly to you.

You can't get trauma cover in super

Trauma insurance, which pays out if you're diagnosed with a serious medical condition, is sometimes seen as a complimentary cover to TPD – however it is not available inside of super. This could negate the benefit of having insurance that's easier to manage. For example, if you had to purchase a standalone policy to have your needs met.

More on what "Own occupation" and "Any occupation" mean

When your TPD is inside super it can only be classified as "any occupation". This means if you become disabled you must show you won't be able to return to work in any capacity, in any industry. It essentially means you aren't able to work at all, even in a field outside of your normal career.

If you have TPD outside of super, you will have the option to select an "own occupation" TPD policy. This means you only need to show you can't return to work in your chosen profession. It is a more expensive form of cover as you will only have to prove you can't work in that one profession. It also means you can return to working in some capacity at a later date in another field.

How is TPD taxed in super?

Your premiums are usually tax deductible when held inside super. With TPD insurance cover though, premiums are subject to different deductions depending on how the TPD insurance definition meets the "disability superannuation benefit" definition set out by the government's Tax Act. However, unless you hold "own occupation" TPD insurance, you should find it is 100% deductible because "any occupation" meets this disability definition.

For anyone who held an "own occupation" TPD policy inside super before July 2014, your premiums are 67% deductible. If your "own occupation" TPD cover is linked to a life insurance policy, premiums are generally 80% tax deductible. For more information on TPD tax, head here.

How are TPD benefits paid out in super?

If you make a successful claim on your TPD inside super, the benefit is usually paid directly into your super fund.

Once the benefit is paid out, you will have the option to withdraw the benefit partially or in full. However, your payout may be subjected to a number of taxes if you do this. You can also choose to leave the full amount inside your super account which means you may be eligible for certain tax offsets.

Bottom line

If you've decided TPD insurance inside super is enough for you, you want more comprehensive cover with a traditional TPD policy or will add it on to your life insurance, it's worth protecting your financial future from accidents or illnesses that could jeopardise everything you've been working towards.

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Frequently asked questions

Written by

Gary Ross Hunter

Gary Ross Hunter is an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full profile

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