TPD Insurance – The Basics
In Total and Permanent Disability insurance, a lump sum payment ismade to the insured in the event that an illness or injury renders the person completely incapable of ever working again. With TPD insurance, you are covered in case you cannot earn a living, something your life insurance cannot do if you are still alive. In addition, losing the ability to work due to injury or illness is usually accompanied by increased costs of ongoing medical care. The payout is meant to cover these expenses in addition to your normal family and household expenses.
In many cases, the level of cover needed in TPD is higher than that for life insurance because of the ongoing medical expenses associated with total and permanent disability. On the other hand, a TPD cover would exclude the funeral expenses typically included in a life cover. The amount of coverage you get is dependent on your needs, so it is important to determine how much would be needed to cover your expenses, debts and medical costs. If you have children, you would also need to factor in the amount of money needed to pay for their education, based on the number of years they will be in school.
Obtaining your policy
You can obtain your TPD insurance policy is several ways; you could get a standalone policy from an insurance company or get a cover through your employer in a superannuation fund or group fund owned by your employer. Obtaining your policy through your employer is less expensive because policies are purchased in bulk, making it possible to negotiate lower rates.
When you purchase a TPD cover, you select the amount of money that will be paid to you in case you become permanently disabled and unable to ever work again. This amount is known as the sum insurance. However, in order for a claim to be successful, you must meet the TPD definition included in the policy. Note that if you are holding your policy in a super fund, making a successful claim could be complicated, since you would have to satisfy the TPD definition provided in the policy as well as the one that applies to the super fund.
Total disability definition
There are two main types of TPD policies based on the definition provided for total and permanent disability. The first is the own occupation policy, which defines TPD as the inability to ever work again in your own occupation. The second is any occupation policy; this defines TPD as the inability to ever work again in any occupation. The definitions for TPD usually agree in both superannuation and the main policy if you hold the any occupation policy. If you prefer an own occupation policy, you must carefully consider whether you should hold your policy within a super fund at all.
A waiting period is usually applicable in most policies, so you would have to be off work for at least 3 to 6 weeks before your benefits are paid out, depending on your policy. It is also worth noting that TPD insurance does not provide coverage for disablement resulting from self-inflicted intentional harm. It is always advisable to speak to your financial advisor before deciding on the best approach for obtaining your TPD insurance coverage.