What is Total and Permanent Disability insurance

3-minute read

Whether or not to take out TPD insurance is a matter of individual circumstances and priorities.

The claim requirements can differ significantly depending on the cover that is held so it’s important to ensure the terms and conditions of the insurance policy are understood.

Benefits of TPD insurance

TPD insurance can complement other types of insurance by providing an overall safety net as part of a comprehensive life insurance portfolio. It may provide a lump sum payment in circumstances where the insured is permanently disabled due to illness or injury, in contrast with other types of life insurance, which provide cover for death, specified serious illness or injury or temporary illness or injury where the insured is unable to work.

In the event of Total and Permanent Disability (TPD), policyholders 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 flexibility of the lump sum payment allows the insured to allocate the funds according to their needs. This may involve actions such as repaying debt, home modifications for accessibility, and contributions towards medical expenses, including ongoing rehabilitation. By easing the financial strain associated with permanent illness or injury, TPD insurance not only provides financial support but may also contribute to peace of mind for the policyholder.

TPD insurance is not only limited to work related injuries. While workers' compensation may provide cover for injuries that occur at the workplace, TPD insurance covers a broad spectrum of injury and illnesses that result in total and permanent disablement, regardless of where they occur. TPD insurance terms and conditions can vary between insurers, so it is essential to review the Product Disclosure Statement to understand the scope, limitations and any exclusions that may apply.

Determining TPD insurance amounts

What should I consider?

The amount of TPD cover is contingent upon individual circumstances and priorities. Consider the following expenses when determining the appropriate TPD coverage:

• Outstanding debts
• Replacement of lost income
• Potential housing modifications required for rehabilitation or disability
• Day-to-day living expenses
• Paying for children's education
• Reskilling
• Consider existing TPD cover in your superannuation.

Once the above figure has been determined there may be the possibility of reducing this by exploring any existing cover already in place or what assets may potentially be sold.  

Structure of your TPD insurance cover

There are different ways to structure TPD cover to suit specific needs, budget, and personal circumstances. TPD insurance can be structured as a stand-alone policy or as a linked policy, also known as a rider benefit. For example, to a life insurance policy that provides a death benefit and/or a critical illness benefit.

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, stand-alone TPD insurance policies are generally more expensive than the same TPD insurance cover provided under a linked policy.

Making a TPD Claim

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 often requires presenting supporting medical evidence to the insurer. Actively engaging with the TPD insurer throughout the claims process can facilitate the submission of all necessary documentation, potentially streamlining the processing time for the claim.

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