Q: What is Total & Permanent Disability (TPD) Insurance?
A: TPD insurance provides a lump sum paid if you become totally & permanently disabled. As with Life Insurance this lump sum could be used to pay debts & / or provide a lump sum that can be used to create income, which can help you maintain your lifestyle. TPD insurance can be bought as a standalone product or as a linked extension to a Life & / or Trauma policy.
Q: Are there different types of Total Disability insurance?
A: Yes there are various definitions of total & permanent disability, and your occupation will determine the type of TPD you will be eligible for.
- Own Occupation
- Any Occupation
- Non-Working (Activities of Daily Living)
Q: Can you explain a bit more about the types of TPD covers?
A: With Own Occupation the insured must show that they have a total & permanent disability that prevents them working in their own occupation which they disclosed when applying for this cover.
‘Own Occupation’ is a more liberal definition of disability, because even if you can work in another occupation, you may still be eligible to receive disability benefits. Because it is relatively easy to qualify for benefits under this definition of disability, insurance companies are limiting the availability of this type of coverage. Own occupation coverage is often more expensive, & may only be available to individuals who have a clean medical history & work in a relatively risk-free environment.
And with Any Occupation the insured must show that they are totally & permanently disabled & unable to work in their usual, or any other occupation for which they are reasonably suited by their education, training or experience.
‘Any Occupation’ is often the cheaper option; however it can be more difficult to meet the requirements of this type of disability definition.
Activities of Daily Living – Payment of benefits under this definition are based on the life insured through sickness or injury can’t do 2 of the 5 activities of daily living & will never be able to do so again. (Bathing, Dressing, Toileting, Moving, Eating)
Q: is there anything I need to be aware of?
A: Yes there are a few thing you need to consider.
- You should ensure your insurance cover is adequate for your needs. Under-Insurance can represent a major problem.
- Changes in your personal circumstances (i.e. taking on additional debt) often necessitates higher insurance levels.
- Benefits received via a superannuation policy may be taxed depending on the end beneficiary