Many Australians carry both trauma cover and total disability insurance (TPD). Here’s why.
Although trauma cover and total disability insurance (TPD) are similar, they are designed to produce two different outcomes. That makes it important to understand what both coverages do and what they don’t do.
Trauma Insurance: the Basics
Trauma insurance is taken out for specific illnesses. It pays out a lump sum if you are diagnosed with that illness. The lump sum is designed to help you take care of your financial responsibilities while you recover: both your standing expenses and new expenses such as rehabilitation or carers. Ideally, you are able to fully recover and get back to living your life with no severe financial consequences.
Trauma insurance covers such illnesses as cancer, heart attack and coronary bypass surgery. The illnesses are very specific and are defined within your insurance policy so that you know exactly what occurrences will result in benefits and what ones won’t.
Total and Permanent Disability Insurance: the Basics
Total and permanent disability insurance is taken out for if you become permanently disabled. The payment can be on a monthly basis or in a lump sum. It is designed to help you maintain an income similar to your current one to support yourself and your family. It can also be used to help pay off some of the medical bills you may incur as a result of your disability.
Basically, TPD insurance replaces your income if you are no longer able to work. Policies can be written to cover you if you can no longer work in your field or can require that you are unable to work any job. Obviously, the job-specific coverage will cost more.
The Main Difference Between Trauma Insurance and Total and Permanent Disability Insurance
The main difference between trauma insurance and total and permanent disability insurance is that trauma insurance will pay you for the specified illnesses while you are trying to get back to work, while TPD insurance doesn’t pay you unless you can never go back to work.
Consequently, trauma insurance costs more and is more likely to result in a claim.
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