Benefit Period

Life, TPD, Trauma and Income Protection Compared

How each type of personal insurance works, inside and outside super, and the catches to check before you rely on it.

This table compares types of cover and ways of holding them, not insurers or prices. Use it to see which risks each type covers and where the rules differ between cover through a super fund and a retail policy you own directly. Premiums vary widely with age, occupation, health, smoking status and the options chosen, so get a personalised quote or check your fund's insurance guide for real figures.

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Cover or optionHow it worksGood forWatch out for
Life (death) cover in superLump sum paid to the fund on death or terminal illness, then paid out to your dependants or estate under the fund's rules and your nominationLow-cost base cover paid from your balance, often with no health questions for default coverDefault cover can be switched off if the account is inactive for 16 months, you are under 25 or the balance has stayed under $6,000; tax may apply if paid to a non-dependant
Life cover outside super (retail)You own the policy and name beneficiaries directly; premiums paid from after-tax incomePaying adult children or others who are not tax dependants without the super death benefit taxPremiums are not tax-deductible; full underwriting at application
TPD cover in superLump sum if you are unlikely ever to work again in any occupation suited to your education, training or experienceAffordable TPD paid from your balanceOwn-occupation TPD is not permitted for new cover in super; the benefit must also meet the permanent incapacity condition of release; tax may apply under age 60
TPD cover outside superLump sum under the policy definition, which can be own occupation (unable to work in your own job)Specialised workers whose income depends on one occupationHigher premiums from after-tax money; definitions and exclusions vary
Trauma (critical illness) coverLump sum on diagnosis of a listed condition meeting the policy definition, whether or not you can workCovering treatment, recovery time and a partner's time off after a serious illnessNot allowed inside super; definitions of each condition differ; premiums rise steeply with age
Income protection in superMonthly benefit for temporary incapacity, often with a 2-year benefit period in default group coverBasic income replacement without paying from your take-home payShorter benefit periods are common; you cannot claim a personal tax deduction; offsets for sick leave and workers' compensation
Income protection outside superMonthly benefit up to 70% of pre-disability income (90% for the first six months on many policies) after a waiting periodLonger benefit periods such as to age 65, extra options, personal tax deductionSince October 2021 new policies use income from the 12 months before the claim and stricter tests after two years on claim
Stepped premiumsPremium recalculated each year at your current ageLower cost now; cover you expect to reduce or drop within about 10 yearsRises faster as you age, often sharply after 50
Level premiumsPremium based on your age when cover starts, rising only with indexation and insurer rate changesCover you expect to keep for a long timeHigher at the start; not guaranteed to stay the same; benefit lost if you cancel early

Rules for cover in super come from the Superannuation Industry (Supervision) Act 1993 and its regulations, including the Protecting Your Super and Putting Members' Interests First changes. Income protection design rules reflect APRA's 2021 individual disability income insurance measures. Tax rules are set by the ATO and can change each financial year. Before relying on any row, read the product disclosure statement or your fund's insurance guide, and check: