Disclaimer – This article is for general information and education purposes only. It is not intended as financial or legal advice. Whether your TPD payout cancels or reduces your other insurance cover depends on the wording of your specific policies, superannuation rules, and insurer practices. Always seek advice from a superannuation/insurance-claims lawyer or financial adviser before making decisions about your insurance cover.
Winning a Total and Permanent Disability (TPD) payout is a major financial milestone. But many Queenslanders with multiple insurance policies ask the next logical question:
“If I get a TPD payout, will it cancel my other insurance?”
The answer depends on:
- Whether your TPD and death cover are linked or standalone.
- The rules of your super fund.
- Your insurer’s terms and conditions.
This guide explains when a TPD payout cancels or reduces your other insurance, when it doesn’t, and the steps you can take to protect yourself.
Linked vs standalone insurance policies
Most Australians with superannuation insurance have a combination of TPD, death, and sometimes income protection. The key question is whether they are linked or standalone.
| Type of cover | Definition | Impact after TPD payout |
|---|---|---|
| Linked cover (most common) | Two types of cover reduce or cancel each other when claimed. | If death and TPD are linked, your death cover reduces by the same amount as your TPD payout or is cancelled. |
| Standalone cover | Death and TPD are separate and independent. | TPD payout has no impact on death cover; both can remain active. |
| Income protection | Pays a monthly benefit for temporary incapacity. | TPD payout may reduce or offset income protection benefits, depending on your policy. |
✅ You can confirm your insurance type by checking your Product Disclosure Statement (PDS) or insurance schedule.
What happens to death cover after a TPD payout?
| Scenario | Impact on death cover |
|---|---|
| Linked TPD and death cover | A TPD payout usually reduces your death cover by the same amount. Example: $400,000 TPD + $400,000 death cover → claim $400,000 TPD = death cover cancelled/reduced to $0. |
| Partially linked cover | Death cover is reduced but not cancelled entirely. Example: $500,000 death cover + $250,000 linked TPD → after a TPD payout, death cover reduces to $250,000. |
| Standalone death cover | A TPD payout has no effect. Death cover remains intact. |
What about income protection and trauma cover?
| Cover type | Interaction with TPD payout |
|---|---|
| Income protection | Pays monthly benefits if you can’t work temporarily. Some policies stop or reduce benefits once a TPD payout is received. |
| Trauma/critical illness cover | If standalone, trauma benefits (e.g. cancer or heart attack) can still be paid after TPD. If linked, the cover is often reduced or cancelled. |
Case examples in Queensland
| Example | Facts | Outcome |
|---|---|---|
| Linked policy – death cancelled | Michael had $300,000 TPD and $300,000 death cover, both linked. He claimed TPD after a spinal injury. | TPD payout approved. Death cover reduced to $0. |
| Standalone policies | Sarah, a teacher, had $200,000 death cover and $200,000 TPD as separate policies. | TPD claim approved for $200,000. Death cover remained intact. |
| Income protection overlap | John, 50, had income protection of $4,000/month. Later, he claimed a $400,000 TPD payout. | His insurer reduced income protection benefits, arguing overlap. |
Pitfalls to avoid
❌ Assuming your death cover always remains after a TPD payout – most super-based policies are linked.
❌ Not reading your PDS – fine print usually outlines whether your cover reduces.
❌ Overlooking income protection offsets – monthly payments may be cut.
❌ Forgetting to review your insurance needs post-payout – leaving your family exposed in case of death.
How to protect yourself
| Step | Why it matters |
|---|---|
| ✅ Review your insurance schedule | Confirms whether your policies are linked or standalone. |
| ✅ Ask your super fund or insurer | Get clarity before making a claim. |
| ✅ Consider standalone death cover | Keeps your family protected after a TPD payout. |
| ✅ Seek financial/legal advice | Helps you restructure cover and plan long-term. |
| ✅ Review cover post-payout | Your financial position may change significantly. |
FAQs
Does a TPD payout always cancel my death cover?
No. It depends on whether your cover is linked or standalone.
What happens if my cover is linked?
Your death cover will usually reduce by the same amount as your TPD payout.
Does income protection stop if I claim TPD?
Not always. Some policies continue, but many reduce or stop payments after a lump sum.
Can I buy more death cover after a TPD claim?
Possibly, but most insurers limit new cover once you’ve been classified as permanently disabled.
Key takeaways
- Whether a TPD payout cancels other insurance depends on policy structure.
- Linked cover usually means death cover is reduced or cancelled.
- Standalone cover is unaffected by a TPD payout.
- Income protection may be offset, and trauma cover can still apply.
- Always review your PDS and seek advice before lodging a claim.
A TPD payout is life-changing for Queenslanders who are permanently unable to work. But it can also affect other insurance you may have, especially death and income protection cover.
In many cases, a TPD payout cancels or reduces linked death cover – leaving families unprotected unless you put other arrangements in place. Standalone cover is usually unaffected but is less common in superannuation.
At TPD Claims Lawyers, we help Queenslanders secure their TPD entitlements and navigate the flow-on effects for their other insurance. Contact us today for a free, no-obligation consultation about your case.
Last updated: 8 September 2025