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Total & Permanent Disability (TPD) Insurance
Unlike life insurance, Total & Permanent Disability Insurance provides a lump sum in the event that the person insured becomes totally or permanently disabled. It is designed to help discharge any outstanding debts you might have, help with your ongoing living expenses and help pay for medical costs while you are disabled. This type of personal insurance is usually combined with Term Life insurance or Trauma insurance as it is relatively inexpensive in most cases, although in some instances you may want it as a “stand alone” policy.
The amount of disability cover required varies on the amount of debt you and/or your family may have.
The difference between Total & Permanent Disability Insurance and Income Protection Insurance
The main difference between TPD and income protection insurance is that TPD pays out a lump sum, whereas income protection provides an income on the basis of you being unable to do your own job for longer than the specified waiting period and until you can go back to work or until the end of your benefit period. For this reason, TPD should be considered as an additional bolt on policy (to be included with life insurance or trauma insurance) rather than a replacement for income protection insurance.
Types of Total & Permanent Disability Insurance
Currently in Australia there are four main types of total and permanent disability insurance available. These include:
- Own occupation – this is where the insured is unlikely to ever work in their own occupation for the rest of their life.
- Any occupation – this is where the insured is unlikely to work in their profession, business or similar occupation to which they are fitted by education, training and experience for the rest of their life.
- Home duties – where the insured is unable to engage in any normal domestic duties for a continuous period of at least three months. This type of TPD insurance generally goes through more processing where medical evidence is more closely considered to identify the level of incapacitation.
- Modified – where the insured is permanently and totally unable to perform without physical help from someone else or suffers cognitive impairment requiring permanent and constant supervision and has been disabled for 3 preceding months and will continue to be disabled in the future.
It is important that you understand the type of cover you have or require as there are vast differences in the cover and premiums payable.
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February 2010
