TPD Insurance: A Comprehensive Definition
July 26, 2022

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Understanding TPD Insurance

Becoming too sick or injured to ever work again can be just as traumatic for a family as a death – in financial terms anyway. Serious illnesses and injuries that prevent you from earning an income can provide a financial as well as a physical hardship for a struggling family.

Total and Permanent Disability insurance, more commonly called TPD insurance, is designed to lift the weight of worry off the already overburdened shoulders of a family brought low by a loved one’s illness or injury.

Put simply, TPD insurance is a type of cover provided to those who find themselves unable to work ever again because of illness or injury. A total and permanent disability is generally classified as one that will remain with a person for the duration of their life or from which they will never recover.

TPD cover offers a lump sum payment that could cover:

  • Rehabilitation
  • The repayment of current debts
  • Everyday living expenses for you and your family.

It effectively works the same as a Life Cover payout, except it has to support you as well as your family. With some companies, you also have the possibility to receive an additional lump sum payment to help with medical and rehabilitation expenses.

TPD payments usually only begin after a person has had a disability for an extended period of time (between three and six months) and is deemed by a doctor unlikely to be able to return to work again. Some company policies however do provide exceptions to this rule, waiving the waiting period for certain medical conditions.

What types of TPD insurance can I get?

There are generally two types of TPD cover options available: ‘any occupation’ and ‘own occupation’.

  • With any occupation, you can only make a claim if you are unable to undertake any occupation that would be suitable to your training, education and experience.
  • With own occupation, you can claim insurance if you are no longer able to work in your chosen field of employment. This is the more comprehensive option, although that also means the premiums are higher. It also cannot be owned or funded by superannuation.

A TPD case study

A classic example to distinguish between the two types of TPD cover is a surgeon who has lost the use of one hand. Obviously, a surgeon would be unable to work at the operating table any longer. With an “own occupation” policy, he would be able to receive a payout. But for an “any occupation” policy, he may find it difficult to receive any benefits, since the insurance company may decide he could still work in a supervisory or teaching capacity.

Receiving a claim

Sometimes receiving a claim is not a clear-cut case. With some illnesses or injuries such as quadriplegia, it is obvious from the beginning whether you’ll be eligible for a payout. Other cases are more complex, particularly if it’s not yet clear if you’d be able to return to work or not. Where possible, insurers usually make a decision if you’ve been absent from work for six months because of illness or injury and it is likely that you’ll never be able to return to work.

Although TPD cover can often be purchased outright, it is commonly combined with a Life Cover policy. It is worth noting that TPD insurance is not tax deductible, although the benefits are tax-free.

You should carefully consider what TPD cover is right for you before you commit to a policy. You don’t want to be caught out at a time when you need all the help you can get. TPD insurance helps take care of you and your family, so that the bills get paid, the mortgage is covered, and the children’s education is guaranteed. It will also be a massive bonus if you need to refit your home to make it more suitable to your changed lifestyle standards. So don’t rush your decision. If you want more information on TPD insurance, contact us today.

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