Insurance through superannuation: pros and cons
Many Australians hold life, TPD and income protection through their super fund. Here's what to weigh up.
Life insurance, total and permanent disability (TPD) cover and trauma (critical illness) cover are often bundled together, which can make it hard to understand what each one actually does.
Life insurance
Life insurance (also called death cover) pays a lump sum to your beneficiaries if you pass away, or in some cases if you are diagnosed with a terminal illness. It is designed to clear debts and support your family financially.
TPD insurance
TPD cover pays a lump sum if you become totally and permanently disabled and are unlikely to work again. Definitions vary between "own occupation" and "any occupation", so the wording matters a great deal.
Trauma insurance
Trauma or critical illness cover pays a lump sum if you are diagnosed with one of a defined list of serious conditions — such as cancer, heart attack or stroke — regardless of whether you can still work.
- Life — pays on death or terminal illness.
- TPD — pays on permanent disability.
- Trauma — pays on diagnosis of a specified condition.
Compare the definitions in each insurer's PDS before deciding, as the same product name can mean different things at different insurers.