By Philippa Billings, Chief Advice Officer, Otivo
Life insurance, TPD and income protection get lumped together as personal insurance, but they protect against three very different events, and confusing them can leave a nasty gap. One pays if you die, one if you're permanently disabled, and one if you're temporarily unable to work. Knowing which does what is the foundation of sensible cover. Here's how the three compare.
Life insurance pays a lump sum if you die or are terminally ill. Total and permanent disability, or TPD, cover pays a lump sum if you're permanently unable to work. Income protection replaces part of your income if you're temporarily unable to work due to illness or injury. As at July 2026, many Australians hold some of these through their super.
What does life insurance cover?
Life insurance, sometimes called death cover, pays a lump sum to your beneficiaries if you die, and usually if you're diagnosed with a terminal illness. It's designed to support the people who depend on your income, helping them clear debts and meet living costs after you're gone. Of the three covers, it's the one focused entirely on what happens to others after your death, rather than on supporting you during your own lifetime.
What does TPD insurance cover?
Total and permanent disability cover pays a lump sum if you become permanently unable to work due to illness or injury. It's meant to help with the long-term costs that follow a life-changing disability, from medical and rehabilitation expenses to modifying a home or replacing lost future income. Policies differ in how they define permanent disability, often around whether you can work in your own occupation or in any occupation you're suited to, and that definition matters a great deal to when the cover pays.
What does income protection cover?
Income protection replaces part of your income, commonly up to around 70%, if you're temporarily unable to work because of illness or injury. Rather than a single lump sum, it generally pays a monthly benefit for a set period while you recover. It's the cover aimed at the interruption most likely to affect a working person, a spell out of work that stops the pay cheque but isn't permanent. Waiting periods and benefit periods vary between policies.
How do the three work together?
They cover different points on a spectrum of misfortune, so they can complement rather than overlap. Income protection handles a temporary inability to work, TPD handles a permanent one, and life insurance handles death. Someone might hold all three to cover the full range, or a combination suited to their situation. Seeing them as a set, each filling a different gap, is more useful than treating any one as a catch-all.
Which of these might you already have in super?
Often more than you'd expect. Life cover and TPD are commonly provided as default insurance inside super, and some funds include income protection as well. One important point, trauma cover, which pays on diagnosis of a serious illness, has not been available inside super for new policies since July 2014, so it's held outside super where people choose to have it. Checking what your fund provides is the way to know which of these you already hold.
Frequently asked questions
What's the difference between TPD and income protection?
TPD pays a lump sum if you become permanently unable to work, while income protection pays an ongoing partial income if you're temporarily unable to work. One is for a permanent outcome, the other for a recoverable one.
Can I have all three?
Yes. Many people hold a combination of life, TPD and income protection to cover death, permanent disability and temporary inability to work. The right mix depends on your circumstances and what you already hold.
Do I get these through my super?
Life cover and TPD are commonly provided as default insurance in super, and some funds also offer income protection. Trauma cover, however, has not been available inside super for new policies since July 2014.
Where to from here
Understanding which cover does what is the foundation of getting your protection right. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a personal insurance inside super module that helps you understand how much personal insurance you might need, based on your dependants, debts, income, age and existing cover. It helps you see which gaps matter for you.
Sources
- ASIC MoneySmart — life insurance, TPD and income protection — moneysmart.gov.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.