Introduction
While both income protection and total and permanent disability (TPD) insurance are designed to support you if you can't work due to illness or injury, they work very differently.
📈 Income Protection Vs TPD Insurance Feature Comparison
Here's a high level overview of how they compare:
| Feature | Income Protection | TPD Insurance |
|---|---|---|
| Payout Type | Monthly benefit | Lump sum payment |
| Purpose | Covers temporary and long-term inability to work | Covers permanent inability to ever return to work |
| Occupation Definition | Usually own occupation for first 2 years, may change later | Own or any occupation chosen at application |
| Benefit Period | 2 years, 5 years, or to age 65/70 | One-off lump sum |
| Partial Claims | Based on reduced income | Outside super only (partial loss benefits) |
| Employment Status | Must be earning income at claim time | Employment status irrelevant |
| Claims Timelines | 88% under 2 months (avg 1.4 months) | 49% under 2 months (avg 3.9 months) |
| Claims Admittance | 94% (individual advised) | 83% (individual advised) |
| Benefit Reassessment | Recalculated using actual income | Fixed sum insured |
| Policy Links | Standalone or bundled | Can be linked with life/trauma |
| Expectations | Rehab and return-to-work encouraged | No ongoing obligations after payout |
| Tax Treatment | Premiums deductible, benefits taxable | Premiums not deductible, benefits usually tax-free |
📝 Key Takeaways
TPD insurance pays a one-off lump sum if you’re permanently unable to ever return to work, helping with long-term financial impacts like debts or care costs.
Many people choose to hold both types of cover, as they complement each other — one supports ongoing income, the other provides long-term financial security.
Income Protection claims are often easier and faster to make, as eligibility is based on reduced income rather than permanent incapacity.
🧩 TPD & Income Protection Cover Strategies
📆 Standalone IP to age 65
- Ongoing assessment and work requirements
- Some policies drop to “any occupation” after 2 years
- Policy value may reduce over time
- Consider claim escalation and super contributions
🧾 Standalone TPD
- Higher claim hurdle than income protection
- Manages a lump sum while facing health issues
- Requires careful planning and investment
🔄 Combined Short IP + TPD
- Faster access to support, easier to claim
- Supports family through early illness and rehab
- Long-term safety net if you can't return to work
Note: Most 2-year IP claimants don't return to work
📊 Cover Strategy Comparison: Income Protection vs TPD (Across Ages)
Based on Jodi's case study - assuming $13,100/month income replacement. See Jodi's situation
| Age | Option 1: 5yr IP + TPD | Option 2: IP to Age 65 | Option 3: TPD Only | Option 4: 2yr IP + TPD |
|---|---|---|---|---|
| 35 | IP: $13,100/mo TPD: $3.7M (27yrs) Premium: $5,889 | IP: $13,100/mo TPD: - Premium: $4,182 | IP: - TPD: $4.5M (32yrs) Premium: $3,742 | IP: $13,100/mo (2yrs) TPD: $4.2M (30yrs) Premium: $5,930 |
| 45 | IP: $13,100/mo TPD: $2.5M (17yrs) Premium: $6,960 | IP: $13,100/mo TPD: - Premium: $5,793 | IP: - TPD: $3.4M (22yrs) Premium: $6,189 | IP: $13,100/mo TPD: $3.0M (20yrs) Premium: $6,996 |
| 55 | IP: $13,100/mo TPD: $1.2M (7yrs) Premium: $17,719 | IP: $13,100/mo TPD: - Premium: $12,171 | IP: - TPD: $2.0M (12yrs) Premium: $17,244 | IP: 2yr @ $13,100/mo TPD: $1.7M (10yrs) Premium: $19,040 |
Frequently Asked Questions
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Get a full quote, you can easily adjust the waiting period (and any other aspect) at the end of the quote process to see how different options affect your premium.
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