Critical illness vs disability (TPD) cover: Key differences
Know the key differences between critical illness (trauma) insurance and total permanent disability (TPD) cover. Contact Policywise to compare plans & quotes.
Critical illness (trauma) insurance and total and permanent disability (TPD) insurance can act as a buffer against life's unforeseen challenges. They provide lump sum benefits that soften the financial impact of serious illnesses and injuries and go beyond what ACC (Accident Compensation Corporation) offers. ACC covers injuries due to an accident but doesn't support illnesses, like cancer, strokes, or disabilities due to health conditions.
Critical illness and TPD cover differ in what conditions trigger a payout. TPD insurance provides a benefit if you suffer a permanent disability, while trauma insurance pays out if you are diagnosed with a covered critical illness, even if you do not end up with a permanent disability.
Both can be purchased as standalone plans or accelerated benefits from your life insurance (claims will be deducted from your life cover sum insured). You may also be able to get TPD cover as an optional add-on to your trauma insurance. Contact Policywise to learn more about your options, and compare plans and quotes from New Zealand's most trusted insurers.

Health | Life | Trauma | Total and Permanent Disability | Income Protection
Learn more on different types of insurance from an expert licenced financial adviser and see what's best for your circumstances.

Learn more about different types of insurance from a licenced financial adviser and see what's best for your circumstances.
Health | Life | Trauma | Total and Permanent Disability | Income Protection
Critical illness vs disability insurance (TPD): Key differences
Aspect |
Critical illness (trauma) insurance |
TPD Insurance |
Benefit payment | Lump sum (full or partial) | Lump sum (full or partial) |
Benefit amount | Sum insured (up to $3 million) | Sum insured (up to $5 million) |
Trigger for payout | Diagnosis of a covered critical illness or medical condition | Requires the insured to meet the criteria for total and permanent disablement depending on their type of TPD cover (Own, Any, or Modified Occupation) |
Purchase options | Standalone plan or as an accelerated benefit included in life insurance | Standalone plan, accelerated benefit included in life insurance, or optional benefit added to critical illness insurance |
Understanding critical illness (trauma) insurance
In 2022, there were over 28,000 new cancer registrations and more than 10,500 cancer deaths New Zealand-wide.
Next to cancer, in 2022, ischaemic heart diseases and cerebrovascular diseases were the leading causes of death, with one New Zealander dying every 90 minutes.
Trauma insurance provides a lump sum payout when the policyholder is diagnosed with a policy-defined critical illness or life-altering injury. These covered conditions may not result in a permanent disability, but could still have serious financial repercussions.
This tax-free payment - which can go as high as $3 million - offers relief during challenging times by:
- subsidising income lost by the patient and loved ones caring for them
- easing the associated costs of recovery, such as home modifications and rehabilitation
- enabling patients to access life-saving or life-prolonging non-Pharmac drugs.
You can get trauma insurance as a standalone plan or an accelerated benefit from your life insurance plan (when you claim, your payment is deducted from your total sum insured).
One of the defining characteristics of trauma insurance is the extensive list of critical conditions covered. Examples of severe medical events which can prompt a full or partial benefit payment include:
- Cancer
- Heart attack
- Heart surgery such as heart valve surgery, aorta surgery, and triple vessel angioplasty
- Stroke
- Intensive care treatment
- Alzheimer’s disease and other dementias
- Motor neurone disease
- Multiple sclerosis
- Parkinson’s disease
- Total loss of sight, hearing, speech, limbs
- Chronic liver failure
- Chronic kidney failure
- Major burns
- Severe diabetes
- Severe rheumatoid arthritis
- Loss of independent existence
- Terminal illness.
Critical illness insurance benefits
Depending on your chosen trauma insurance product, built-in and optional benefits might include:
- Trauma cover: Pays either the full or a portion of the sum insured if you experience a policy-defined medical event, such as those listed above
- Child’s trauma cover: Pays a portion of the sum insured if your child suffers a covered condition
- Total permanent disablement condition: Pays the sum insured if you become totally and permanently disabled
- Financial planning and legal advice: Reimburses you to a policy-defined value in accessing financial and legal advice about how best to use your trauma cover payment
- Grief support: Reimburses a specified dollar value amount for you or your family to receive grief counselling from a professional counsellor.
This is not an exhaustive list. Talk to a Policywise adviser to learn more about the covered conditions and benefits, and get assistance comparing trauma insurance plans and quotes.
Understanding total and permanent disability (TPD) insurance
Total permanent disablement insurance offers a lump sum payment if the insured becomes totally and permanently disabled or partially disabled and unable to work in their chosen occupation. TPD insurance encompasses various scenarios, such as a severe accident, illness, or medical condition, and focuses on long-term disabilities that are anticipated to last forever.
Your TPD payment (which can go as high as $5 million) can be used to cover:
- your usual living expenses, such as food, utilities, mortgage or rent, and debt payments
- additional costs due to your condition, such as home care, help with childcare, house modifications (such as wheelchair ramps), travel costs to medical appointments, or
- the costs of transitioning to a new career.
Insurers offer different types of TPD cover so you can choose the one that fits your circumstances and budget.
- Own Occupation TPD: Your benefit will be paid if you cannot resume your usual work responsibilities within your current role or industry but you still have the capacity to work in a different role.
- Any Occupation TPD: You’ll receive your benefit if you become permanently disabled and unable to perform any type of work reasonably suited to your education, training, or experience.
- Modified TPD: This cover applies if you are not in paid employment (e.g., homemaker or student), are in a very high-risk occupation, or are not eligible for Own or Any Occupation TPD, and you permanently lose your sight, cognitive ability, use of your limbs, or are unable to perform at least two daily living activities without physical support.
You can be covered for total and permanent disabilities by purchasing TPD insurance as:
- a standalone plan
- an accelerated benefit to be deducted from your life cover sum insured. Several insurers also give you the option to buy back your claim amount, restoring your life cover sum insured if you have filed a TPD claim.
- an optional benefit added to your critical illness insurance, allowing you to get the sum insured if you become totally and permanently disabled.
Talk to a Policywise adviser to learn more about these options.
Disability insurance benefits
Depending on your chosen TPD insurance product, the benefits received might include:
- TPD benefit: Pays the full cover amount if you are totally and permanently disabled because of an injury or illness
- Partial permanent disablement benefit: Provides a partial payment if you suffer a permanent partial disability, e.g., lose sight in one eye, lose entire use of a limb, suffer hearing loss, or are diagnosed with other disabilities specified in your policy
- Assistance benefit: Reimburses the cost of specialised equipment, vehicle and home modifications, and other expenses
- Financial and legal advice benefit: Reimburses fees incurred for legal and financial advice on the wisest way to use your TPD benefit
- Counselling benefit/grief support: Reimburses the cost of psychologist or psychiatrist consultations if these sessions are claim-related.
Trauma insurance vs TPD cover: Which one should you get?
While both trauma insurance and TPD cover provide lump sum benefits, they differ in terms of the conditions that could trigger a claim.
With trauma insurance, the insured receives a payout when they suffer a covered critical illness or injury, whether or not they eventually return to work.
For example, if you suffer a heart attack or are diagnosed with cancer and your condition potentially improves, enabling you to return to work (or not), you’ll still receive your lump sum benefit.
In contrast, TPD insurance provides a lump sum payout when the insured becomes totally and permanently disabled and unable to go back to their own or any occupation.
For instance, if you lose your limbs due to a medical condition or injury, and can no longer fulfill your work responsibilities nor qualify for other positions suited to your experience and training, you will receive your lump sum benefit. You can use this payout to support your transition to a new livelihood, make lifestyle changes, and lessen the financial stress of a life-changing event.
Choosing the right cover
Trauma insurance and TPD cover offer invaluable protection and, depending on your circumstances, there are several key points to consider when deciding on the right policy:
- Occupation and lifestyle: Your choice of insurance should align with your occupation and lifestyle. For instance, if your job carries a higher risk of accidents or injuries, TPD insurance may be a more suitable option.
- Health and family: Your overall health and personal circumstances are significant determinants. If you have a family to support or you are at greater risk of specific critical illnesses, trauma insurance may be your priority.
- Budget and premiums: Consider your budget and the affordability of premiums. Evaluate what type of insurance fits your financial capabilities while providing comprehensive protection.
- Existing cover: Assess your current insurance portfolio, including any life cover, income protection, or health insurance policies, and work out if you have adequate protection for your specific needs.
Consulting with an insurance adviser - such as Policywise - can help you compare different insurance plans to make an informed decision that fits your requirements and objectives.
RECOMMENDED READINGS
Income protection vs trauma insurance
Income protection vs total permanent disability (TPD) insurance
What ACC does not cover and how to fill the gap
How Policywise can help
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Disclaimer: All information on this page or website is general information only, not intended as advice, and does not take into consideration your personal circumstances. We recommend consulting a Policywise adviser before making any insurance decision.
Please note: Policywise advisers are licensed by the Financial Markets Authority to provide financial advice in relation to health insurance, life insurance, and disability insurance. You can learn more about this on our Public Disclosure page. All insurance covers are subject to the insurer’s approval of your application.
Insurance policies and their built-in and optional benefits may be subject to stand-down periods, exclusions, terms and conditions, and premium loadings not listed on this website. Optional benefits also have additional premiums. Please refer to the insurance product’s policy document for full details. Insurers may alter these details at any time.
Therefore, nothing in our product pages is intended to be definitive or binding. Where there are discrepancies between any policy wording on this website and the policy wording provided by the insurance company at the time your cover is approved, then the insurance company’s wording will be deemed the correct version.
References
Heart Foundation. (n.d.). General heart statistics in New Zealand. Retrieved 10/03/2025 https://www.heartfoundation.org.nz/statistics
Health New Zealand Te Whatu Ora. (2024, December 12). Cancer data web tool. Retrieved 10/03/2025 https://tewhatuora.shinyapps.io/cancer-web-tool/
Health New Zealand Te Whatu Ora. (2025, January 30). Mortality data web tool. Retrieved 10/03/2025 https://tewhatuora.shinyapps.io/mortality-web-tool/
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