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Income protection vs TPD insurance

What are the key differences between income protection and TPD insurance?

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Both income protection and TPD insurance pay you if an injury or illness prevents you from working. However, there's an important difference between TPD and income protection; namely, TPD only pays out if you become permanently disabled and are unable to work again. It's not designed to cover you if you're only temporarily unable to work – that's what income protection is for.

Key differences between TPD and income protection insurance

TPD and income protection insurance are different products designed to cover different circumstances. TPD insurance provides a lump sum benefit if you become permanently disabled and income protection insurance provides short-term relief for illnesses and injuries that force you to take some time off work. Here's the full break-down on how they differ.

Income protectionTPD insurance
How does it pay out?In monthly instalments, like an incomeIn one lump sum
When does it pay out?If you become sick or injured and can't workIf you become disabled and unable to work again
How much does it pay out?75% of your monthly incomeA specific amount selected by you
What is it designed to pay for?Everyday expenses and payments, just like your incomeDebts, medical expenses, home modifications and more
How long does it pay you for?You select a benefit period (2, 3, 5 years etc or up to a certain age, e.g. 65)You receive a one-off payment (they typically range between $60,000 and $300,000)

Get a TPD insurance and income protection quote today

Know what type of policy you want? We've laid out our income and TPD insurance providers. Prices aren't shown because policies are tailored to your personal circumstances. Compare policy features below and then click through to get your personalised quote.

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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1 - 6 of 12
Name Product Maximum Monthly Benefit Maximum % of Income Covered Maximum Benefit Period Minimum Entry Age Sum Insured
TAL Accelerated Protection Income Protection
$30,000
Up to 70%
Up to
Age 65
18
$1,305 million
Get up to 70% of your income covered with flexible short and long term benefit periods.
AAMI Income Protection
$10,000
Up to 75%
Up to
5 years
18
$222 million
Take out a new AAMI Income Protection policy and get $100 eGift card after your first 4 months of cover. T&Cs apply. Ends June 30, 2024.
NobleOak Income Protection
$30,000
Up to 70%
Up to
Age 65
18
$65 million
With NobleOak, you can lock in a policy with a benefit period covering you up to the age of 65. Cover limits may go as high as $30,000.
Medibank Income Protection
Medibank Income Protection
$12,500
Up to 70%
Up to
5 years
18
Data not available
Get a quote in less than 5 minutes. No blood tests or medicals needed. 10% discount for Medibank health members.
ahm Income Protection
$10,000
Up to 70%
Up to
5 years
18
Data not available
Get a quote in less than 5 minutes. No blood tests or medicals needed.
Insuranceline Income Protection
$10,000
Up to 75%
Up to
5 years
18
$222 million
Protect your family with an Insuranceline policy and you can go into the draw for a chance to win a $1,000 gift card. New Customers only, T&Cs apply. Competition entries close on 31 July 2024.
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What is TPD and who is it for?

TPD insurance provides you with a lump sum payment if you become permanently disabled by an injury or illness and can never return to work. Unlike income protection, a TPD policy only pays out when you are deemed permanently disabled. This generally means you must have lost your sight, the use of your limbs or have been absent from work for at least six months as a result of an illness or injury that will prevent you from ever returning to normal work again.

It can be used to pay for a number of things including:

  • Mortgage repayments
  • Debts such as car loans
  • Hospital and medical expenses
  • Rehabilitation costs
  • Modifications to your home and vehicle
  • Costs of a permanent nurse or housekeeper

Is TPD insurance worth it?

TPD can be a really helpful insurance benefit to have if something more serious happens to you. You can also get it included with your life insurance cover.

Unlike income protection, you also don't need to be employed to be eligible for TPD insurance. For instance, if you are a homemaker, performing unpaid domestic duties on a full-time basis, you would qualify for a TPD benefit if your work involves:

  • Maintaining and caring for the family home
  • Managing a household
  • Cooking and cleaning
  • Caring for dependent children

Still not sure it's right for you? Here are a few common TPD insurance benefits that might make it worth buying.

  • Partial disability benefit. You can also get paid a specific amount in the event of partial disablement, e.g. loss of one leg or sight in one eye.
  • Buyback option. If your TPD cover is part of your life insurance, when a TPD claim is paid, the amount will be deducted from your life cover amount, but you can buy it back and reinstate the original amount.
  • Death benefit. Some policies come with a death benefit option, even if your TPD cover is a standalone policy.
  • Premium freeze option. This allows you to choose to retain your current annual premium under a stepped style when you reach a certain age and it will reduce the insured amount gradually.

How does income protection insurance work and who is it for?

Income protection insurance is a short-term benefit paid in monthly instalments and designed to temporarily take the place of your regular income while you recover from an illness or injury.

It usually provides you with up to 75% of your monthly income, which in the short term can be enough to keep you and your family provided for while you aren't earning. An income protection policy will usually have standard features built in such as:

  • Indexation – increases the benefit paid each year in line with CPI rises (inflation).
  • Partial disablement – pays a benefit if the insured is only partially disabled and cannot work at their full capacity.
  • Premium waiver – premium payments are waived if the insured becomes totally disabled.
  • Recurrent disablement – the waiting period is waived if the insured suffers a further disablement after returning to work.
  • Death benefit – a benefit is paid to the beneficiaries if the insured dies before the policy expires.
  • Global protection – 24/7 coverage anywhere in the world.

Which type of insurance is better?

If it's simply income replacement you're looking for, your best option is probably income protection insurance. It's ideal if you need to take some time off work because of an injury or illness.

TPD, on the other hand, can be invaluable if your injury is more serious and you want to clear big debts like your mortgage.

Why you should consider both

If you want total peace of mind, you need to consider having both. Income protection only provides cover for 75% of your income, so TPD insurance can be taken out to fill the gap and provide you with the other 25% needed, given the right set of circumstances.

Another way the two types of insurance can work together is in relation to waiting periods. Because TPD insurance does not usually pay out for six months or more, you could find yourself with no money coming in for at least that long. In such circumstances, income protection insurance could provide the necessary funds to see you through until you eventually receive your lump sum payment.

Can you claim TPD and income protection at the same time?

Yes. You can often claim both TPD and income protection at the same time and they shouldn't affect one another. However, this might differ from insurer to insurer depending on their underwriting guidelines.

Because your TPD benefit is paying you for the financial impact of being permanently unable to work, it's separate from income protection, which is designed primarily as a form of temporary income replacement. In many cases, this will mean that you can receive a TPD benefit and income protection without the TPD payment impacting your ongoing income protection entitlement. However, there are some exceptions so speak to your insurer before making a claim.

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