TPD insurance, or Total and Permanent Disability insurance, protects your finances if you can’t work due to a lifelong disability. Our comprehensive legal guide covers:
- TPD benefits
- Eligibility for TPD cover
- What is covered
- And how to buy the right policy.
About TPD Insurance
Total and Permanent Disability (TPD) insurance, also known as permanent disability insurance, is designed to protect your lifestyle in the unfortunate event of becoming totally and permanently disabled. It provides a financial safety net for those who can no longer work due to injury or illness, ensuring you pay your:
- Daily expenses
- Medical bills
- Other financial obligations
This kind of insurance provides much-needed peace of mind when you are recovering from a permanent illness or injury.
Eligibility to Claim a TPD Insurance Benefit
Eligibility for a TPD insurance claim depends on the severity of the permanent illness or injury. Australians who have experienced a sickness or injury that prevents them from performing their regular job or any other work for which they are qualified due to their education, training, or experience can make a TPD claim.
Remember that the definition of total and permanent disability will vary from one life insurer to another. However, there are generally two main types of TPD cover:
1. Your Own Occupation
Because of your disability, you can’t go back to your previous job. While this type of TPD cover is generally easier to claim, it is often more expensive.
2. Any Occupation
You will never be able to return to work in a position that uses your existing background, education, or experience. Although this coverage is more affordable, getting a lump sum payout is often more challenging.
Difference between own occupation and any occupation >
How is TPD Paid Out?
An approved TPD insurance benefit typically comes in the form of a lump sum payment, which can be used to cover various costs, such as medical and rehabilitation costs, as well as daily living expenses. How much cover you need can vary significantly based on your circumstances. Hence, when applying for TPD insurance, it’s best to make a financial plan to have enough if you become unable to work.
What Does TPD Insurance Cover?
TPD insurance, or TPD insurance cover, provides comprehensive financial support when you become totally and permanently disabled. In this circumstance, a successful TPD claim provides a lump sum payment that helps pay for medical and rehabilitation costs, so you have the financial resources you need for recovery. These funds replace your lost income, so you can cover:
- Your daily living expenses.
- Medical, rehab and treatment costs
- Mortgage payments
- Credit card payments
The lump sum payment from a TPD insurance claim can help repay these debts, reducing financial stress during a challenging time. It is strongly advised that you review the product disclosure statement (PDS) thoroughly to understand the specific coverage details and limits before buying a TPD insurance policy or when you make a TPD claim.
Do I Need TPD Insurance?
You should carefully consider your financial situation and future needs before buying TPD insurance. Without TPD insurance, the financial impact of a total and permanent disability could be devastating. Daily bills, medical expenses, and living standards could become significant challenges if you cannot work. When considering how much cover you might need, there are several factors, including:
- Age
- Occupation
- Lifestyle
- Family circumstances
- Financial situation
For example, younger people who are permanently disabled would need higher coverage because they have a greater number of lost years of income, but older workers would need less. Additionally, take into account policies you might have with a super fund, such as income protection, health insurance, or life insurance.
Thankfully, many Aussies already have TPD cover in their super account. But if you have doubts, an experienced financial adviser can help you decide the amount of cover you need.
How to Buy TPD Insurance
Purchasing TPD insurance can be done through various channels. You can buy TPD insurance:
- From a financial adviser
- Through an insurance broker
- Online from a life insurance company
In Australia, many superannuation funds automatically provide TPD insurance to their members, often at a lower cost due to bulk purchasing. This automatic cover generally does not require medical checks.
You can either buy TPD insurance on its own or package it with life cover. When packaged with life insurance, the policy may provide more comprehensive coverage but could reduce the life payment benefit by any amount paid out on a TPD claim.
Choosing Between Stepped or Level Premiums
Deciding between stepped or level premiums, which have distinct cost implications over time, is a significant factor when considering TPD insurance.
- Stepped premiums: start lower but increase each year as you age, reflecting the higher risk of a claim as you age.
- Level premiums: you pay a higher premium at the start but remain more stable over time since they are not based on age.
The choice of stepped or level premiums will significantly impact the cost of TPD insurance and it’s affordability in the long term.
Key Factors Impacting TPD Insurance Costs
Several essential factors affect TPD insurance costs, including:
- Age: premiums typically increase as you get older
- Gender: different costs associated with male and female policyholders
- Occupation: high-risk jobs attract higher premiums due to the increased likelihood of claims
- Lifestyle choices: smoking or participation in extreme sports can lead to higher premiums
Medical history is crucial when determining TPD insurance costs because pre-existing conditions can result in higher premiums or exclusions within the policy. Additionally, certain policy features, such as Consumer Price Index (CPI) adjustments, will increase the insured amount annually.
Steps to Making a TPD Insurance Claim
Making a TPD insurance claim involves several critical steps.
- Review your TPD insurance policy terms, including any waiting periods and exclusions.
- Contact the insurer as early as possible and ask for the necessary forms and requirements for a claim.
- Gathering compelling and current medical evidence is a key part of a successful TPD claim. This includes detailed documentation from doctors and specialists that proves your medical condition and how it impacts your work capacity.
- Next, you must accurately complete the TPD claim form. Mistakes or omissions will delay or even reject your claim.
- Then, submit your TPD claim to the insurer and your super fund.
It’s advisable to do this as soon as possible, as there are often strict time limits for challenging any decisions made by the insurer or super fund regarding your claim. Acting quickly and with high attention to detail can significantly improve the chances of a successful claim.
Additional Benefits of TPD Insurance
TPD insurance often comes with additional benefits that provide increased financial support and peace of mind. For example, some policies include an advanced payment benefit, which offers an early payout of a portion of the TPD insurance benefit if you suffer a significant but not total disability, such as loss of use of a single leg or sight in one eye. This option is often not available through a super account.
Other benefits of TPD insurance can include:
- Death benefit: pays a smaller amount if the TPD benefit is not payable
- Inflation protection benefit: increases the cover amount annually to keep pace with inflation
- Grief Support Benefit: covers the cost of grief counselling sessions
- Long Distance Accommodation Benefit: this option helps cover accommodation costs for immediate family members who need to travel to be with you during your recovery
Important Considerations and Exclusions
If you are buying TPD insurance, you should also consider policy exclusions like waiting periods and cover limits. For example, many policies exclude coverage for disabilities resulting from intentional self-inflicted injuries.
Because insurance companies define total and permanent disability differently, you should carefully read the product disclosure statement. Considering these factors alongside the current and future premium costs will help you make an informed decision.
Other Insurance Options
For comprehensive coverage, consider related insurance options, such as:
- Life insurance: pays a death benefit to your beneficiaries and can be linked with TPD insurance to form a robust protection package.
- Critical illness insurance: This insurance offers a lump sum payment when diagnosed with a specific serious illness.
- Income protection insurance: provides regular payments to replace lost income if you’re temporarily unable to work due to illness or injury.
Permanent Disability TPD Insurance FAQs
What is Total and Permanent Disability (TPD) insurance?
Total and Permanent Disability Insurance provides a lump sum TPD benefit to people who acquire a total and permanent disability. This insurance payout helps them pay bills such as medical expenses, living costs, and other financial obligations.
How do I determine how much TPD cover I need?
To determine how much TPD cover you need, consider factors such as your:
- income
- financial dependents
- ongoing expenses
- and existing insurance policies.
Seeking advice from a financial adviser can provide you with the necessary guidance.
Can I make multiple TPD claims if I have more than one policy?
Yes, you can make multiple TPD claims and receive several payouts if you hold more than one policy. However, each claim must be submitted separately, with each being assessed according to the insurer’s definition of total and permanent disablement.
Hence, you may not get a TPD benefit from all insurers. So, for a successful outcome, you must review the terms of each policy before making multiple claims.
What does TPD mean?
TPD is insurance jargon that refers to total and permanent disability. It is a kind of insurance commonly found in Australian superannuation accounts. When a permanent disability prevents you from doing your job, and you meet your policy’s TPD definition, you can claim a benefit payout.
How does TPD work in a superannuation fund?
A TPD payout is deposited into your superannuation account when you have an approved claim. If you leave the funds there, you generally pay no tax, and it won’t impact Centrelink benefits.
