What is Total and Permanent Disablement (TPD) Insurance?
TPD insurance aims to provide a lump sum payment if you suffer an illness or injury and you:
- Are permanently unable to work again or
- Are unable to care for yourself independently, or
- Suffer significant and permanent cognitive impairment.
Total and Permanent Disablement can prevent you from working and require expensive medical treatment and ongoing care.
What does TPD Insurance Protect?
People will normally take out TPD cover to help cover a range of expenses/funding needs in the event of total and permanent disablility including:
- Debts
- Medical Expenses
- Other expenses needs (i.e. living expenses, children’s education). Note that you may be able to claim for Income Protection cover you might have if you become disabled. Therefore, you should consider your income protection cover when taking out TPD cover.
TPD Definitions
The definition of TPD can vary and may include options for a range of occupations, including homemakers. Options that you can choose from include:
Any Occupation
Under a TPD Any Occupation definition, a benefit is paid if you are unlikely to be gainfully employed in any business, profession or occupation for which you are reasonably suited by your education, training or experience. This definition is generally less expensive than an Own Occupation definition, but some people may be harder to meet for some people.
Own Occupation
Under a TPD Own Occupation definition, a benefit is paid if you are unlikely ever to be gainfully employed in your own occupation. Own Occupation provides a generous definition as it is specific to your occupation and is particularly suitable for specialist occupations. The premiums for this type of definition are more expensive than Any Occupation.
Home Duties / Homemaker Definition
Under a TPD Home Duties Occupation definition, the benefit will be paid where after not performing the Normal Domestic Duties for three consecutive months and after consideration of medical and other evidence, you are incapacitated to such an extent as to render you unlikely ever to be able to perform the Normal Domestic Duties.
Insurance providers may offer other TPD definitions, and the definitions of the above TPD covers may differ between insurers. You will have to refer to the specific insurance provider PDS’s for further detail.
Split TPD
A ‘Split’ TPD definition gives you access to the TPD ‘Own Occupation’ definition outside of super and the TPD ‘Any Occupation’ definition inside super. This definition splits the total cost across the two policies. The insurance provider will only pay the full TPD Sum Insured under one definition (never both).
Your claim is first assessed under the TPD ‘Any Occupation’ definition within super. If this is not met, your claim is then assessed under the TPD ‘Own Occupation’ definition outside of super.
Your TPD Any Occupation premiums are paid from your superannuation savings, and the additional benefits of TPD Own Occupation are paid from you from your personal savings. This means that you may be able to afford comprehensive TPD cover without it having a significant impact on your current cash flow/ personal savings.
Under the Split TPD, the sum insured must be the same amount inside and outside of super.
Funding Options
TPD ‘Own’ Occupation is only available outside superannuation. Other TPD definitions (‘Any’, ‘Homemaker”) are available both inside and outside of super (including SMSFs)
Premium Types
Stepped and Level premiums are available for TPD Cover
How are TPD Insurance claims paid?
You contact the insurer to notify them of becoming total and permanent disablement. This begins the claims process. Depending on the insurer, you will need to get a doctor’s certificate to provide proof of total and permanent disability and meet your TPD definition.
When TPD is held within superannuation, the trustee can only pay benefits if you meet a condition of release. If you are under age 60, a portion of any TPD benefits you receive from your superannuation fund may be taxable. Any payments received after you reach age 60 will be completely tax-free.
Are there exclusions on TPD Insurance?
Typically, the most common TPD insurance exclusion is total and permanent disablement from intentionally self-inflicting injury or suicidal attempt. However, this may differ between insurance providers. You will need to refer to the PDSs of insurance providers for automatic exclusions of life insurance.
When applying for life insurance through a retail provider, you will need to complete an application form providing both personal and medical information so that the underwriter can assess the application. They may also request further medicals and/or reports. Depending on your health, they may ask you to pay an additional premium, known as loading. In some cases, the insurance company may apply a medical exclusion to your policy. For example, a decision may be to not cover you for high-risk activities or a pre-existing injury/illness. This would mean that if an event occurs where there is an applicable exclusion, the benefit under the policy is not payable.
Other insurance covers you may wish consider include life, income protection and trauma insurance.
Protecting your family and lifestyle in the occurrence of an unforeseen event is a crucial step in managing risk to your financial well-being. Read about our insurance services here.