GUIDES & RESOURCES

Total and Permanent Disability (TPD) Insurance

TPD Insurance is something you hope you’ll never need. But if you have an accident or suffer a serious injury, the last thing you want to think about is your potential loss of income.
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What is TPD insurance?

Essentially, TPD may provide financial security for you and your family if you were unable to work due to becoming ‘totally permanently disabled’ from illness or injury. But every provider typically has a different definition for ‘totally and permanently disabled’, which is why it’s important to read the product disclosure statement (PDS) before choosing a provider.

What are the different occupation definitions and how do they affect TPD cover?

Each Life Insurance provider has their own definition of how TPD is covered within their products. More specifically, the amount of benefit you may be able to claim could depend on how these definitions are worded in your policy:

  • Own occupation: This refers to whether or not you’re only unable to work in your current occupation following an accident or injury. For example, you may no longer be able to work on-site following an accident or injury if you’re a builder or electrician, but you may be able to still work in an administrative or office capacity.

  • Any occupation: This refers to whether or not you’re unable to work in any occupation following an accident or injury. Simply put, if your policy uses the ‘any occupation’ definition, then you may not be able to make a TPD claim unless you’re unable to work in any occupation at all following an accident or injury.

  • Activities of daily living: If you’re unable to perform some of the tasks listed as activities of daily living in your policy, you may be able to claim payable benefits on your TPD policy. Depending on your policy and provider, some of these activities can include bathing and showering, dressing and undressing, eating and drinking, using the toilet, and the extent to which your movement is restricted either by walking, or by wheelchair or some form of walking aid.

  • Domestic duties: This refers to whether or not you’re able to perform domestic duties following an accident or injury. Domestic duties cover is typically relevant for someone whose sole occupation is to maintain the family home. Examples of domestic duties can include cleaning of the home, preparing family meals, doing family laundry, shopping for family groceries, and taking care of dependent children.

What does TPD insurance typically cover?

Depending on your provider and policy, you may qualify for a benefit payment if due to sickness or injury you meet any or all of these criteria:

  • You’re unlikely to work in your occupation ever again
  • You’re unlikely to work in any occupation again
  • You’re unlikely to perform domestic duties ever again
  • Permanent loss of your functional capacity
  • Significant impairment to your whole body
  • Loss of limbs and or vision
  • Unable to look after yourself ever again (which relates to the ‘activities of daily living’ policy definition
  • Permanent loss of intellectual capacity

What’s generally not covered in TPD insurance?

If you choose Accident Cover, you typically won’t be covered if you suffer a TPD due to an illness or sports injury. The same rule may apply for each type of cover, which is why it’s important to assess what cover is suitable for you and what’s included in your policy before signing up. Additionally, intentional self-inflicted injury is often a standard exclusion on TPD policies.

What benefits could I get through TPD insurance?

If you become Totally and Permanently Disabled and you’re insured with suitable cover, you may receive a one-off lump-sum payment to help pay for rehabilitation, debts and your future cost of living. How much depends on your disability, the terms of your policy and the eligibility of your claim.

How do I make a claim?

When it comes to claiming TPD, you need to notify your insurer as soon as possible after an injury or illness. Depending on what TPD cover you have and your disability, your insurer may ask for the following:

  • Medical reports and test results from your doctor;
  • Details of your work duties;
  • Payslips and tax returns.

Your insurer will then determine if you have suffered a TPD and the payout amount.

Can I get TPD through my super fund?

Some super funds actually include TPD cover, it’s important to check with your superfund to ensure its sufficient coverage if something were to happen.

What are the premiums associated with TPD insurance?

When you purchase TPD insurance, you generally get a choice between two types of premiums:

  • Stepped Premiums: these typically increase with each year that you hold your policy. This is mainly to do with your age and the greater chances of making a claim.
  • Level premiums: The cost of the premium will generally be more at the start, and may not increase at the same rate as stepped premiums. This can be a good option if you plan on holding your policy for a long period. That said, it’s important to note that premiums can still be increased by your insurer from time to time as they review their premium rates.

Should I consider TPD insurance?

First up, think about the expenses you’ll need to cover if you’re sick or injured and unable to work, such as:

  • Medical and rehabilitation costs: For example, surgery, medication, and or physiotherapy
  • Living expenses for you and your family: Including home energy and internet bills, groceries, petrol, and school and childcare fees
  • A mortgage or credit card debts: Consider any debts as well as interest payable on them
  • Other insurance costs: Such as car insurance and home & contents insurance
  • Retirement savings: For example, if you’re unable to work and draw an income, your savings could quickly start to reduce as you draw upon it to sustain bills and living expenses
  • In-home assistance: Whether you could require paid in-home assistance from a third party service provider such as a nanny or cleaner to assist with domestic duties

 Then think about what you already have that might help cover those costs and calculate the difference:

  • Private Health Insurance to help cover some of the medical costs
  • Any Life Insurance products you’ve already purchased, such as Trauma cover or Income Protection
  • Any savings or investments you have, such as shares or property
  • Any financial support which can be offered from your family and friends

Do I require TPD insurance if I work in a high-risk profession?

TPD insurance is not a legal requirement, even if you work in an environment or setting where the probability of you being in an accident which makes you permanently disabled is higher.  

If you do work in a high-risk profession, you might want to learn more about your coverage through Workers Compensation, and how that could help cover wages, as well as medical expenses and rehabilitation if you’re injured at work.  

However, if you’re a sole trader you won’t be covered by Workers Compensation, and might want to consider Life Insurance products such as Income Protection, TPD, and or Trauma insurance.

What are some of the factors to consider when comparing providers?*

Before you decide on your provider, some of the factors which may be worth double-checking are:

  • Does it cover your ‘own occupation’ or ‘any occupation’?
  • Under what conditions might a partial benefit be payable?
  • What are the policy limits?
  • What are the policy exclusions?
  • What are the waiting periods before you can make a claim?
  • What are the premiums?

While price is an important factor to consider when comparing policies, it’s not the only important factor. Ensuring that you understand the level of cover included, and the potential benefits if you were to make a claim, can be just as important.

What should I tell my provider before signing up?

Before you get TPD insurance, it’s a good idea to ensure there’s nothing that could potentially get in the way of you making a claim. That’s why you should be upfront with your insurer and give them all the information you can before you sign up. They’ll usually ask for your:

  • Age
  • Job
  • Medical history and any pre-existing conditions
  • Family history
  • Lifestyle (for example, whether or not you smoke can affect your premiums)
  • Any high-risk hobbies (such as dirt bike riding, or sky-diving)

Depending on the provider, you may be required to perform a blood test in order for the insurer to have an accurate view on your health, and therefore make a more accurate assessment of your risk level.

How much can TPD insurance cost?

The cost of TPD insurance varies depending on the person applying for it and whether or not they’re buying it separately, adding it on to their super, or buying it as a package with Life Cover. If you’d like help comparing your options, iSelect has partnered with Lifebroker to help you compare from their available policies.

Can I bundle my TPD cover with my Life Insurance?

Yes, typically you can bundle TPD cover as part of your Life Insurance policy You can also bundle Trauma Cover with a Life Insurance policy unless your Life Insurance policy is held through your superfund. In some cases, you may be eligible to receive a discount by bundling two or more policies with a single insurer.

Can multiple people be insured under a single TPD policy?

Yes, depending on your policy and provider you may be able to insure multiple people on the policy. For example, a married couple may decide to insure both of their lives in one policy. Depending on the insurer, you could be eligible for either a percentage or flat rate discount on your premiums when a second person is added to the policy.

How do I compare TPD insurance policies?

iSelect has partnered with Lifebroker to help you find  TPD insurance policy from their range of providers. Start comparing TPD policies online today, or call our friendly team on 13 19 20.

Sources:
1. https://moneysmart.gov.au/how-life-insurance-works/total-and-permanent-disability-tpd-insurance

Last updated: 27/10/2020
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