GUIDES & RESOURCES

Total & Permanent Disability (TPD) Insurance

In this article, iSelect will answer all the key questions about TPD and the ways it can help protect you and your family if you’re no longer able to work due to major illness or injury.
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If you suffer from a serious illness or injury your ability to earn an income will be seriously affected. If you’re unlucky enough to find yourself in this situation, you’ll need to find a way to replace your future income. Luckily, you can help prepare yourself and your family for these unforeseen events by investing in total and permanent disability (TPD) insurance.

What is a TPD insurance?

The definition of a TPD will vary from insurer to insurer. Generally speaking, you will be considered to have suffered a TPD if you:

  • Are unable to work again in any occupation, or
  • Are unable to work again in your occupation

However, just being off work for an extended period of time may not constitute a TPD. It is therefore vital that you clearly understand an insurer’s definition of a TPD before you make a decision on which policy is suitable for you.

More specifically, it’s important to read the PDS of your potential policy to better understand terms, inclusions, exclusions, and limitations.

How do you make a TPD claim?

If you suffer a serious injury or illness, you’ll need to notify your insurer at the earliest possible opportunity. You will generally need to provide notice to your insurer as required by your policy, usually in writing or over the phone.

Once notified, your insurer will assess your claim to determine if you have suffered a TPD. If your claim is successful, you will be paid a once-off lump sum. The amount of your payout can depend on the nature of your ongoing disability and the terms of your policy.

This money can then be used to help pay for the ongoing costs of rehabilitation, debt repayments, and your future cost of living.

What does TPD insurance generally cover?

The type of injuries or illnesses TPD insurance covers ultimately depends on which policy you choose. In most cases your insurer will offer you three types of cover to choose from when selecting your policy:

  • Critical Injury Cover: protection should you suffer a TPD as a result of severe burns, major head trauma, injuries leading to blindness, loss of hearing or loss of a limb
  • Critical Illness Cover: cover in the event of a TPD resulting from a heart condition, cancer, neurological disorder, organ failure or blood diseases
  • Sports Cover: this cover will protect you if you suffer a TPD while on the sporting field

Who is TPD insurance generally suitable for?

While everyone’s circumstances are different there are a few basic questions you can ask yourself to help you decide if TPD insurance is suitable for you:

  • Do you have dependents?: if you have a family that relies on you to provide for them your TPD insurance can provide you with greater peace of mind should you no longer be able to work
  • Do you have a mortgage or other debts?: if you have a mortgage or other debt TPD insurance can help you continue to meet these obligations
  • Do you have sufficient savings if you can’t work?: consider how much income you and your family require to live day-to-day and how long your savings can sustain your lifestyle
  • Other types of insurance you may have: you may already have insurance cover similar to TPD insurance, especially through life insurance
  • Other support available to you: in some cases you may be able to get support from family and/or friends if you are no longer able to work
  • Possible eligibility for government benefits or worker’s compensation: should you suffer a TPD while at work you may be able to bring a worker’s compensation claim. Government support may also be available to you should you be unable to work again

What do you need to disclose when applying for TPD insurance?

When you apply for TPD insurance, you will need to let your insurer about anything that will affect whether or not they accept your application. You will need to provide the insurer with all the information they request, at your own cost, or your application may be rejected.

It’s also important to note that if anything should happen before your application is complete that may affect the outcome, you need to let your insurer know.

Should you choose stepped premiums or level premiums?

Once you have on a TPD policy you will need to decide how you want to pay you premiums. Generally with TPD insurance you will be able to choose between stepped premiums or level premiums.

A stepped premium will increase with each year that you hold your policy. The level of your premium will depend on factors such as age and the policy you have chosen. Generally, stepped premiums cost less than level premiums in the beginning, but this may reverse over time. If you decide on a stepped premium make sure you budget for this increasing cost.

Level premiums, on the other hand, will remain largely the same over time. With a level premium, additional costs will only occur when and if your insurer raises their fees. Although the price increases with a level premium are usually less than stepped premiums, it is important to remember that you will be paying more when your cover begins. Level premiums are a good option if you intend on holding your policy for a long time or want cost predictability.

Compare TPD insurance policies online with Lifebroker

Looking for a good deal on TPD insurance? With Lifebroker, you can compare policies on offer from our range of life insurance providers, and select the policy that suits you and your family. Start comparing policies online today, or call their friendly team on 13 19 20.

Sources:

1. https://www.tal.com.au/total-and-permanent-disability-insurance/tpd-insurance-all-the-details
2. https://www.tal.com.au/recovery-insurance
3. https://www.mlcinsurance.com.au/insurance-options/total-and-permanent-disability#tab-tab-73ee39e1-011f-4a78-8a8c-431f16a330b5
4. https://www.moneysmart.gov.au/insurance/life-insurance/total-and-permanent-disability-cover/

Last Updated: 16/12/2019

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