If you're self-employed and unable to work because of a serious injury or illness, you may have access to TPD insurance through your super fund.
Many sole traders have cover through:
- A previous employer's super fund
- Their own super contributions
- Industry funds such as Cbus, AustralianSuper or Australian Retirement Trust
Unfortunately, many people are unaware they have TPD cover and forget that it can lapse if contributions stop.
This article will look at:
- How self-employed people can claim TPD insurance
- How to check if your TPD cover is still active
- The difference between SMSF and TPD cover
- Common pitfalls and when to get legal advice
Why Self-Employed People Have Fewer Safety Nets
No workers' compensation for your own injuries.
If you are self-employed or a sole trader, you are generally not covered by workers' compensation for your own injuries. Unlike employees, you don’t have an employer paying for insurance that provides income support and other benefits after a workplace injury.
If a serious injury prevents you from working, there is usually no statutory scheme to cover:
- Lost income while you recover
- Medical and treatment expenses
- Rehabilitation and return-to-work support
For employees, workers' compensation is often the first financial safety net after a workplace injury. For self-employed people, TPD insurance through superannuation may be one of the few forms of financial protection available if an injury or illness permanently stops them from working.
Remember, TPD claim does not require an injury to be work-related, just that it permanently prevents you from working, regardless of how or where it happened.
How Super Fund Insurance Works When You're Self-Employed
Contributions keep your insurance alive.
Most industry super funds include TPD insurance, with premiums deducted directly from your super balance. As long as your account remains active and has enough money to cover those premiums, your insurance generally stays in place.
For self-employed people, super contributions are voluntary. If contributions stop, premiums and fees continue to be deducted, reducing your balance over time. This can cause your TPD insurance to lapse, often without you realising it.
This is, therefore, drastically different from employees, whose employer must contribute at least 11.5% of ordinary earnings.
The 16-month rule
Under the Protecting Your Superannuation Package Act 2019, super funds must cancel insurance if an account is inactive for 16 months, unless the member opts in. Inactivity generally means no contributions or rollovers.
This rule protects low-balance accounts from erosion but creates a risk for self-employed people who stop contributing.
Remember:
- While your super fund is legally required to notify you, these notifications are often missed, leading to an account being deemed inactive.
- Usually, to keep your super active, only a small payment is required every 16 months.
Some super funds may allow you to reactivate or reinstate TPD insurance if you resume contributions or opt back in, but rules vary between funds. It’s important to review your super fund terms and conditions, as cover may not automatically restart once it has been cancelled.
SMSF and TPD: A Common Gap
A self-managed super fund (SMSF) is a type of superannuation fund where the members are also the trustees and are responsible for managing the fund themselves.
If you have an SMSF, you almost certainly don’t have default TPD cover. Unlike industry funds such as AustralianSuper, Cbus, or Australian Retirement Trust, SMSFs do not automatically bundle insurance with membership.
You need to arrange TPD cover separately through an insurance provider, and the SMSF trustee must purchase the policy.
Many SMSF members assume they have the same insurance protections as people with industry funds. Unfortunately, this is not the case and it’s a common misunderstanding that can have serious consequences.
Previous Employer Funds: Cover You May Not Know About
Many self-employed people held jobs earlier in their careers before going out on their own. Each of those jobs may have generated a super fund account with TPD insurance attached.
Old super accounts from previous employment may still hold active TPD insurance, even years later. If the balance has been sufficient to cover ongoing premiums, the insurance may remain in force long after you leave the job.
We often see self-employed people discover they still have TPD cover through an old super fund from a job held 10 or 15 years ago.
The ATO's online services through myGov show all super accounts linked to your tax file number, including old and inactive accounts. Checking this is the single most important step a self-employed person can take to understand their TPD position.
SMSF vs Industry Fund: TPD Cover Comparison
As we mentioned, a Self-Managed Super Fund (SMSF) is a private superannuation fund you control yourself, whereas an industry fund is a professionally managed, pooled super fund run by a larger organisation where investment decisions are made on your behalf.
Understanding the difference between these two fund types is critical for self-employed people assessing their TPD position because it affects how the insurance is set up and who is responsible for managing it.
Common Scenarios and FAQs
Can I claim TPD if I'm a self-employed tradie and my doctor told me to find another career?
Yes, if you have active TPD cover through any super fund and your condition permanently prevents you from working, you can claim TPD. TPD does not depend on workers' compensation or on being an employee. If you cannot return to any job suited to your education, training, or experience, you may have a valid claim.
Which account should I claim through, my SMSF or my old industry fund account, if I have both?
You generally lodge a TPD claim through the super fund that actually holds active TPD insurance at the time you became unable to work. In most cases, this will be your old industry fund, because it typically includes default group TPD cover (as long as it hasn’t been cancelled or lapsed).
Your SMSF is different. It only has TPD insurance if you specifically set up and maintain a separate policy through it. If no such policy exists, there is nothing to claim.
What should I do if my super fund emails me saying my insurance is about to lapse?
Make a contribution immediately to keep your account active. Even a small contribution resets the ‘inactivity clock’. If you have already stopped working due to injury or illness, contact the fund urgently to discuss your options.
In some cases, you may be able to make a claim on cover that is about to lapse if the disability occurred while the cover was still active.
Can I get TPD insurance if I'm self-employed and don't currently have any active insurance?
Yes, but it’s important to bear in mind that it can’t be backdated. You can join an industry super fund and receive default TPD cover, or you can arrange a TPD policy through your SMSF or directly through an insurer.
Remember:
- Most policies include a waiting period and exclusions for pre-existing conditions.
- TPD insurance only covers conditions that arise after the cover starts.
Can I still make super contributions to keep my insurance active if I am self-employed but had to stop working due to an injury?
Yes, you can make personal contributions to your super fund even after you stop working. There is no requirement to be employed or to be earning income to contribute. Making even a small contribution keeps your account active.
This is one of the most important steps you can take to protect your cover while you assess your TPD options.
Look Out for These Red Flags
Watch for these issues if you are self-employed and considering a TPD claim:
- Your super fund has not received contributions for over a year, and you have not opted in to maintain insurance
- You rolled your old employer fund into your SMSF without checking whether the old fund had TPD cover that would be cancelled by doing so
- Your SMSF trustee (which may be you) never arranged a separate TPD insurance policy
- You receive a letter or email from your fund warning about inactivity or insurance cancellation
When to Get Legal Advice
Consider speaking to a TPD solicitor if:
- You are self-employed and have been unable to work for 3 months or more due to a serious injury or illness an need help assessing where your TPD currently stands
- You have multiple super funds (including old employer funds) and are unsure which ones have active TPD cover
- Your TPD insurance has lapsed and you believe the disability began before the cover was cancelled
- Your super fund has denied your claim or is taking longer than 6 months to make a decision
- You have both an SMSF and an industry fund and are unsure how to coordinate claims
- You are also considering an income protection claim or other insurance through your superannuation fund
Read our article on Claiming Both TPD and Income Protection
Why early legal advice matters:
Self-employed people are some of the most vulnerable claimants when it comes to TPD. For this reason, legal advice is more generally recommended.
Common issues include:
- Irregular super contributions
- Lapsed or unknown insurance policies
- No workers’ compensation safety net
Key Takeaways
- Self-employed people are not covered by workers' compensation for their own injuries. TPD insurance through a super may be your primary safety net if a serious injury or illness permanently stops you from working.
- Check all your super funds, including old ones from previous jobs, before claiming. You may have active TPD cover through a fund you forgot about. Use myGov to find all accounts linked to your tax file number.
- Self-managed super funds do not include default TPD insurance. If your only super is an SMSF and you have not purchased a separate policy, you have no TPD cover.
- Industry fund TPD insurance depends on regular contributions. If you stop contributing for 16 months, your fund can cancel your cover automatically. Even a small contribution resets the clock.
- Consider legal representation. This is often necessary for more complex cases, where the insurer is denying the claim, where you have multiple super funds, or when you have both an SMSF and an industry fund.
Get Help Now
If you’re self-employed or a sole trader and are concerned about the status of your TPD insurance, Smith's Lawyers offers a no-obligation review of your situation with no upfront cost. A member of the team will assess your rights, explain your options and let you know the best course of action.
Contact Smith's Lawyers today:
- Call 1800 960 482 for a free, no-obligation consultation about your situation
- No upfront costs: We operate on a No Win, No Fee, No Catch® basis; you only pay if we secure compensation for you
- Or request a call back: Use the form below to have our experienced team get in touch at a time that’s convenient for you.
