Can you claim on multiple insurance policies at the same time?
One of the most common questions advisers receive is 'can I claim on multiple insurance policies at the same time?' This is often asked after the person realises they may have insurance cover sitting in their super.
This is where the confusion begins.
People think insurance is like a mobile phone plan. One policy replaces another. Or, even worse, that claiming on one insurance policy means the others will disappear.
However, the situation is more complicated. Some insurance covers stack; some do not. Some will coordinate in the background. Others will reduce or discontinue payout.
This is what people get confused about the most. This is how claiming on multiple insurance policies works in Australia.
Why this question matters
Most working Australians already have insurance without actively choosing it. Life insurance and TPD (Total & Permanent Disability) insurance get automatically bundled into super. Over time, people may add retail insurance on top as their income increases or as they reach major life milestones such as buying property or starting a family.
On the surface, it seems advantageous to have multiple policies, but it becomes a question of the type of cover.
This is where the ability to claim multiple insurance policies becomes a more valuable understanding. The policies can substantially differ when it comes to applying a lump sum provision, or an income replacement provision.
“People don’t realise they already have insurance until something goes wrong.”
Life insurance, TPD and trauma. These usually stack
Life insurance and trauma insurance are both examples of benefit-based policies. This means that they each have a promise for a specific payout if one of a number of events happens.
For example, if you die with two life insurance policies, both of them can pay out. Or, if you hold two trauma policies and you meet the definition, both of them can pay. This includes policies held both inside super and outside super.
In Australia, there is no legal rule that says you can only claim once for these types of cover.
However, insurers take a look at total cover amounts when you are applying for something new.
If you are applying for new cover, insurers usually ask what other policies you have. If the total cover amount seems to be excessive for your income, debts, or dependents, they may limit what they are willing to cover or ask for justification.
Income protection plays by completely different rules
The most misunderstanding surrounds here.
Income protection isn’t about paying a benefit for becoming sick or injured. It’s about replacing lost income due to inability to work.
Because of this, income protection cannot be profitable.
Policies typically cap benefits to about 70 percent of your pre-disability income. Some older policies and super policies go to 75 percent, and in some more complex arrangements, slightly more due to super contributions.
This overall cap applies to all income protection policies combined.
“Income protection is designed to replace income, not create more of it.”
The answer is yes, you can claim on more than one income protection policy, but the total payment across all policies is still subject to the income cap.
How insurers coordinate income protection claims
When you file an income protection claim, each insurer wants to know about other policies you have. They also examine your income prior to your disability by looking at tax documents, payslips, and business financials.
Income definitions vary from policy to policy.
Income protection policies sold to the general public often review income for the 12 months leading up to the disability. Some older policies may evaluate the best income from the last 3 years. Income protection policies sold through your superannuation generally review the last 12 month period.
Once an insurer has defined your income, they collaborate with other insurers so that total payouts do not exceed the threshold.
Example:
Pre disability income: $80,000 per year
Maximum payout: $56,000 per year (70 percent of pre disability income)
So even with two policies that promise to pay $50,000 each, you will not get $100,000. Instead, the payments will be adjusted to ensure the total payout stays at $56,000.
This type of coordination is permitted under the Insurance Contracts Act 1984 and is reinforced through policy documents and not other forms of legislation.
The super fund trap that catches people out
One of the biggest risks with multiple income protection policies includes group cover inside super.
Some super fund policies explain their benefits are lower due to what you receive from other insurers. Sometimes, the super policy pays out nothing.
Example scenario:
Super fund income protection: $2,000 per month
Retail income protection: $6,000 per month
Income cap at 70 percent: $8,000 per month
If the retail policy pays $6,000, the super fund will not pay its $2,000 benefit. You are technically insured for $8,000 but only receive $6,000.
This is why overlapping income protection needs careful structuring.
“Every insurer handles offsets differently. That’s where people get burned.”
What if you become TPD while on income protection?
A common misconception is that income protection only pays while an injury or illness is temporary, and that payments automatically stop once someone is assessed as permanently disabled.
That is not always the case.
Income protection can continue to pay even if you are permanently disabled, as long as you remain unable to work and you are still within the policy’s benefit period.
Here’s how the interaction actually works:
TPD insurance pays a one-off lump sum if you are assessed as being permanently unable to return to work.
Income protection pays a regular income while you are unable to work, and payments can continue up to the end of the benefit period (for example 2 years, 5 years, or to age 65).
So if someone is declared permanently disabled but holds:
a 5-year income protection benefit period, payments can continue for up to 5 years, or until they are able to return to work.
an income protection policy to age 65, payments may continue right through to age 65, subject to the policy terms and ongoing eligibility.
In other words, TPD does not automatically cancel income protection. The key determinant is the benefit period, not whether the disability is considered temporary or permanent.
How these benefits interact, including any offsets or stopping rules, is set out in each policy’s Product Disclosure Statement and aligns with guidance and industry frameworks overseen by Australian Prudential Regulation Authority.
This is why understanding benefit periods and policy wording matters just as much as the headline cover amount.
Why people end up with multiple policies
Having multiple insurance policies isn't wrong!
Some people choose to have layers of cover, such as:
Default cover inside super for basic protection
Retail cover outside super for more comprehensive definitions or flexibility
Older policies kept for desirable wording
There is also a possibility of unintentional overlap. Default super cover is in the background while retail insurance is added later.
Having more than one policy isn't the problem. It is not understanding how they work, or overlap, that is the most concerning.
Can insurers decline paying if you have other cover?
For life insurance, TPD, and trauma insurance, insurers can’t refuse a claim just because you have another insurance policy. It is a different case with income protection because insurance companies can and will lower income protection benefits to fit income restrictions (subject to cover limits).
APRA and ASIC provide these guidelines, and they have access to the claims made with the Life Insurance companies. Although there are a high number of claims accepted, there are still many claims with reduced benefits because of these insurance policy restrictions.
What the data tells us
According to APRA Life Insurance Statistics 2023:
Income protection claims are more complex and take longer to assess than lump sum claims
Disputes are more common where multiple income sources or policies exist
Benefit coordination is a leading source of consumer confusion
ASIC MoneySmart also warns consumers that holding multiple income protection policies does not guarantee higher payouts.
“You generally can’t be paid more than your actual income.”
The real takeaway
Yes, it is possible to file insurance claims on multiple policies simultaneously.
You can receive payouts from life insurance, Total and Permanent Disability (TPD) insurance, and trauma policies concurrently, regardless of whether it is through your superannuation (super) or through retail cover.
Income protection insurance is not like this. It has a ceiling, is coordinated (limited by what other income protection policies you may have), and is meant to replace income, not augment it.
The risk isn’t that you have too much insurance. The risk is that you are paying for coverage that you cannot realize.
“A decline or reduction is not always bad news. It often just means the policies were never structured properly.”
Knowing how your policies interact with each other before putting in a claim is the difference between having insurance that looks good on paper, and insurance that actually works when life doesn’t go as you planned.
Resources
Insurance Contracts Act 1984 (Cth)
ASIC MoneySmart. Life insurance explained
APRA Life Insurance Claims and Disputes Statistics 2023
https://www.apra.gov.au/life-insurance-claims-and-disputes-statistics