Income Protection and TPD Insurance Working Together

Within the life insurance family are two important forms of cover known as income protection and TPD insurance.

Both of these forms of insurance will cover the same event in some cases, however it would be wrong to suggest that you only need one or the other. In actual fact the two covers can work well together.

Before we look at how these two policies work together it is important to understand exactly what each of them cover and how they operate.

Income Protection Explained

Income protection insurance is designed to protect your income in the event of a temporary absence from work due to illness or injury.

The insurance will replace up to 75% of your income on a monthly basis for a period of time whilst you cannot work.

Although the cover is designed for temporary absences from work, it still plays a major role in any permanent absence from work thanks to the option for a benefit period which runs through until the retirement age of 65.

TPD Insurance Explained

Total and permanent disability insurance, commonly known as TPD insurance, is designed to protect you financially in the event of a permanent inability to work due to illness or injury.

Unlike an income protection policy which pays an ongoing monthly benefit, a TPD policy pays a single lump sum amount that can be used for a range of different purposes.

A TPD insurance claim will be subject to a number of factors, but essentially it involves a doctor giving his or her opinion that you are unlikely to ever return to work.

Working Together

If you were to suffer a serious injury or illness, it may take a number or months or even a number of years before a doctor can confidently declare that you are unlikely to ever return to work.

Your TPD insurance policy will not payout until this time, so you could potentially be waiting a number of years for any money. This is where income protection insurance would fill the gap, as it will cover this period regardless of your likelihood of returning to work in the future.

Another benefit of having both policies in the event of a permanent inability to work is the fact that the two policies can work together to replace 100% of your income.

Generally an income protection policy will only cover 75% of your income. This may be fine for a temporary absence from work, but it may not be sufficient for a permanent absence if you still wish to maintain your standard of living in the long term.

A TPD policy can be structured so that a lump sum amount is invested separately in order to provide an ongoing income stream. The size of this income stream could be set to fill the 25% gap left by your income protection policy.

Combined Policies

When taking out income protection and TPD insurance it may work for you to keep both policies with the same insurance company. Not only can this result in premium savings, but it can also make the process far easier when having to make a claim on both policies. But consider what is right for your circumstances.


This article is about income protection and TPD insurance and is general information only. It should not be treated as factual, as personal advice or be the basis of purchasing any insurance policy. Before deciding on an insurance policy read the PDS carefully and talk to a licensed insurance agent if you need further assistance. MoneyBuddy does not recommend insurance products or provide personal advice in regards to insurance products.

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