What is Total and Permanent Disability insurance

3-minute read

It’s important to note that the claim requirements for TPD insurance can differ significantly depending on the cover that is held. Therefore, it’s crucial to understand the terms and conditions of the insurance policy before making a decision.

Benefits of TPD insurance

Complementing other forms of insurance, TPD (Total and Permanent Disability) insurance plays a crucial role in creating a comprehensive life insurance portfolio. Unlike other types of life insurance that primarily cover death, specified serious illnesses or injuries, and temporary incapacitation preventing work, TPD insurance offers a potential safety net for individuals facing permanent disability due to illness or injury. In such cases, TPD insurance may provide a lump sum payment, where the insured is unable to work.

In the event of Total and Permanent Disability (TPD), policyholders may receive a lump sum payment through TPD insurance, with coverage options for any occupation, their own occupation, or Activities of Daily Living (ADL). The specific definition of TPD applicable to the insured person's policy is outlined in the insured’s policy.

The lump sum payment provides the insured the ability to use the proceeds as they choose. This could include such things as repaying debts, modifying their home for accessibility and contributing towards medical costs including ongoing rehabilitation. This aids in giving peace of mind by reducing the financial burden that can come with a permanent illness or injury.

TPD insurance extends beyond work-related injuries, unlike workers' compensation, which primarily covers workplace incidents. TPD insurance offers coverage for a wide range of injuries and illnesses leading to total and permanent disablement, regardless of where they occur. It is crucial to note that the terms and conditions of TPD insurance can differ among insurers. Therefore, reviewing the Product Disclosure Statement is essential to comprehending the coverage's scope, limitations, and any potential exclusions that may be applicable.

Determining TPD insurance amounts

What should I consider?

The level of TPD cover depends on individual circumstances and priorities.  Below are some costs to consider when deciding how much TPD to apply for:

• Outstanding debts
• Replacement of lost income
• Potential housing modifications needed for rehabilitation or disability
• Day-to-day living expenses
• Children's education expenses
• Reskilling costs
• Evaluate existing TPD coverage within superannuation.  

TPD insurance cover structure

There are various ways to customise TPD cover to align with specific needs, budget constraints, and individual circumstances. TPD insurance can be organized either as a stand-alone policy or as part of a linked policy, commonly referred to as a rider benefit. This linkage could be with a life insurance policy offering death and/or critical illness benefits.

A stand-alone policy is separate from other life insurance policies. A claim made on a stand-alone TPD insurance policy does not directly affect the benefit amount or the ability to make claims on other life insurance policies. However, it's important to note that stand-alone TPD insurance policies typically come with a higher cost compared to the same TPD coverage integrated into a linked policy.

Claiming TPD

When making a claim on TPD, meeting eligibility criteria is essential, involving adherence to the applicable occupation definition and policy definitions of permanent disability. This process may include providing supporting medical evidence to the insurer. Engaging with the TPD insurer during the claims process may help ensure that all required documentation is provided, which may assist in reducing the process times of any claim.

Total and Permanent Disability cover is a key component of financial planning and risk management. By offering a lump sum amount, TPD insurance can be valuable in helping to alleviate the financial strain associated with unforeseen circumstances life may present.