TPD and Trauma Insurance Working Together
7 June 2012
How these two great forms of insurance can work together.
Trauma and TPD insurance are two of the most important forms of insurance for any individual, and when combined they can offer an even greater level of protection.
Unfortunately many people confuse these two forms of cover and believe that they only need one or the other. Whilst is true that there is some crossover, the two covers are very different.
To really understand how TPD and trauma insurance work together, it is important to understand more about each type of cover.
What is TPD Insurance?
TPD stands for total and permanent disability. TPD insurance pays out a lump sum when you suffer an injury or illness so serious that you are unable or unlikely to return to work ever again.
Some TPD insurance claims are very clear cut and can be finalised quickly. Such examples are quadriplegia and the loss of multiple limbs. Other claims can be less clear cut however, and it could take years before you can be diagnosed as unable to return to work ever again.
A TPD insurance claim assumes that you will never be able to work for a living again, so the amount you are insured for should be sufficient to cover your short term medical and rehabilitation expenses, as well as working with your income protection to provide ongoing income support.
What is Trauma Insurance?
As with TPD cover, trauma insurance pays out a lump sum amount, however in this case it is paid upon diagnosis of a terminal illness.
Typical conditions claimed for under a trauma insurance policy include cancer, heart attack and stroke. These conditions won't necessarily stop you from working forever, and in some cases you may only be absent from work for a short term.
The proceeds from a trauma insurance claim are generally used to cover medical expenses and any other costs that go along with fighting the condition. The funds can also be used to replace income if you do not have income protection insurance in place.
Do You Need Both TPD and Trauma Insurance?
In a word, yes. There will be some claims that are covered by both policies, but most will certainly not be covered by both.
An example of a claim under both policies may be a very serious stroke. You would be paid under your trauma policy immediately, and if a doctor indicated that the affects of the stroke would leave you unlikely to ever return to work, then you would be paid under your TPD policy as well.
There is no problem with being paid by both policies, and no one who has made a claim has ever complained about having too much insurance.
But the fact is that most claims cannot go under both policies.
Taking most forms of cancer for example, many of them would be covered by trauma insurance upon diagnosis, but generally you will still be able to work, meaning that TPD insurance would not cover it.
On the other hand if you suffered multiple injuries in a vehicle accident you would most likely not be covered by trauma insurance, however if were deemed to be unable to work ever again your TPD insurance would pay out.
As we can see from the above, there are plenty of cases where a certain incident or condition will only be covered by either trauma insurance or TPD insurance, but not both.
You could take the risk of only holding one of the two policies, however you would be taking a big risk on your financial security. A risk that most experts would agree is simply not worth it.
Many insurance companies offer discounts for combining cover, so you may find that it's not too much more expensive to hold both policies.
Shane Moore is a former financial adviser and an expert commentator on financial and insurance products.
The information contained within Shane's articles is general in nature and should not be acted upon without first seeking professional advice.