Reviewing Your Insurance Inside Super: What You Need to Know About TPD | Covermate Life

Many Australians hold life insurance and Total and Permanent Disability (TPD) cover through their superannuation fund. It’s convenient – the premiums come straight out of your super balance, and in many cases, cover is automatically included. But while insurance inside super can be a cost-effective safety net, it’s not always as comprehensive as you might think.

One of the biggest areas to watch is TPD insurance – and particularly whether your cover is “Any Occupation” or “Own Occupation.”

TPD Inside Super – Why It Matters

TPD pays a lump sum if you become totally and permanently disabled and can no longer work. This benefit can help cover medical bills, living costs, and future financial needs.

However, the definition of disability under your policy is crucial. It determines whether you can actually make a successful claim.

The Limitation of “Any Occupation” TPD

Most TPD cover held through super uses the Any Occupation definition. This means you can only claim if you are permanently unable to work in any job suited to your education, training, or experience.

On paper this sounds reasonable, but in practice it can be very restrictive. For example:

• A carpenter who injures their back may not be able to return to carpentry, but could potentially retrain for lighter work. Under “Any Occupation,” a claim may be rejected.

• Professionals with transferable skills may also struggle, as insurers may argue they could take on alternative, less demanding roles.

This stricter definition is why some people with TPD inside super are caught off guard when their claim is declined.

Why “Own Occupation” TPD Can Be Better

With Own Occupation TPD, you can claim if you are permanently unable to work in your specific job at the time of disability.

Using the same example above:

• That carpenter who can’t physically return to carpentry may qualify for a claim under an “Own Occupation” policy, even if they could do another type of work.

It’s a broader, more claimant-friendly definition – but it usually comes with higher premiums.

Can You Hold Own Occupation TPD Inside Super?

Here’s the catch: under superannuation law, Own Occupation TPD can’t be held directly inside super. The SIS (Superannuation Industry Supervision) legislation only allows TPD cover on an “Any Occupation” basis. But there is a solution – the super-linked policy.

How Super-Linked TPD Works

• The Any Occupation component sits inside your super fund.

• The Own Occupation component sits outside super in a linked retail policy.

• Together, they provide the full “Own Occupation” definition, while still allowing premiums to be partly funded through your super balance.

  
  

This can be a smart option for those wanting the stronger cover definition, but also wanting the tax and cash-flow benefits of funding through super.

Other Things to Consider When Reviewing Insurance Inside Super

• Default cover amounts may not be enough. Many super funds provide only modest cover, which may not meet your family’s needs.

• TPD definitions vary. Even within “Any Occupation,” check for exclusions or restrictions.

• Tax treatment of benefits. Lump sums paid from super can be taxed differently depending on your age.

• Premiums reduce your super balance. While convenient, this can erode your retirement savings over time.

  
  

Key Takeaway

Insurance inside super can be valuable, but it’s not one-size-fits-all. The biggest weakness is that TPD cover is usually limited to “Any Occupation,” which can make claiming difficult. If you want the stronger protection of “Own Occupation” TPD, a super-linked policy may be worth considering.

Covermate Life provides general advice only and does not take into account your personal circumstances. Before making a decision about insurance, consider whether the advice is appropriate for your needs and seek professional advice.