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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.
The definition of a TPD will vary from insurer to insurer. Generally speaking, you will be considered to have suffered a TPD if you:
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.
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.
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:
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:
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.
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.
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.
Last Updated: 16/12/2019