Total and Permanent Disability (TPD) insurance pays out a lump sum of money if you become permanently disabled and are unlikely to ever to return to work in your usual occupation or any occupation for which you are qualified by education, training and experience.
Some insurers may also pay out a TPD benefit if you’re diagnosed with a terminal illness.
This payout can be used however you wish. That said, you may want to consider using it to help pay off your debts, put the kids through school, pay for your medical rehabilitation if needed or for any other living expenses. If you’re unsure how best to use a TPD pay out, you may wish to consider obtaining professional advice from a financial planner.
You can take out TPD cover with your life insurance policy or as a standalone product.
Each insurer defines TPD cover differently. Generally, in order for you to qualify for TPD insurance your illness or injury must cause you to be incapacitated to such an extent that you’re unlikely to ever return to work in any occupation you’re qualified for (through education, training or experience). So, if you are expected to make an eventual recovery from your illness or injury, you are unlikely to qualify for a TPD benefit.
Milder conditions may also not be considered for claims. For example, the loss of a finger may not be severe enough to stop you from working. However, such an injury may qualify you for a limited insurance benefit (e.g. 25% of your full cover amount).
Essentially, anyone can apply to take out TPD insurance, but the success of your application will depend on your eligibility, which in turn is based on several factors. For one, your medical history and pre-existing medical conditions may mean you cannot get covered. For an exhaustive list of inclusions and exclusions, make sure you read the relevant Product Disclosure Statement (PDS) when taking out cover.
TPD policies will generally insure either ‘any occupation’ or just your ‘own occupation’. Say, for example, you are a professional musician and you lose one of your hands.
Your policy premiums, terms and conditions will vary depending on your chosen insurance option, so be sure to read the relevant PDS and consider seeking financial advice before taking out TPD insurance cover.
TPD insurance claims pay you a lump sum when you’re injured and can’t work, while income protection usually pays a regular benefit (e.g. monthly) of a portion of your income for a period of time while you’re unable to work due to your illness or injury. Your income protection insurance also only lasts a set term, at which point the money will stop coming in. This term could be anything from two years to a nominated age (e.g. 65), depending on your policy.
Trauma insurance is different again. It issues a lump sum payment for traumatic, critical illnesses and incidents of specified severity, not for when you’re left permanently disabled.
To make the claims process go as smoothly as possible, you’ll need to:
You can get TPD cover through your superannuation, but it isn’t a feature available in every super fund. Like any financial product, you should compare your options to ensure that you find a great-value product and have the right cover for your situation.
If you’re injured in a workplace accident, you can file a worker’s compensation claim, since your insurance is not conditional on you only receiving compensation from one institution. However, the benefit you receive from your insurer can be impacted by worker’s compensation claims.
The NDIS provides any Australian under 65 with reasonable support to live their lives. You must have a permanent disability and be a permanent Australian resident to qualify for the scheme. While it can be a great program, it may not cover all your expenses and needs. It’s in this circumstance that TPD becomes an attractive option.