Total and Permanent Disability Insurance

Total and Permanent Disability (TPD) insurance provides a lump sum payment should you suffer an illness or injury which totally and permanently prevents you from working again.

There are broadly two main definitions of Total and Permanent Disability:

* Own Occupation – The insured must show that they have a total and permanent disability that prevents them from working in their own occupation which they disclosed when applying for this cover. “Own Occupation” is a more liberal definition of disability, because even if you can work in another occupation, you may still be eligible to receive disability benefits. Because it is relatively easy to qualify for benefits under this definition of disability, insurance companies are limiting the availability of this type of coverage. Own occupation coverage is often more expensive, and may only be available to individuals who have a clean medical history and work in a relatively risk-free occupation.

* Any Occupation – The insured must show that they are totally and permanently disabled and unable to work in their usual, or any other occupation for which they are reasonably suited by their education, training or experience. “Any Occupation” is often the cheaper option, however it can be more difficult to meet the requirements of this type of disability definition.

Some insurers have a third definition available to clients –a “homemaker” definition. Payment of benefits under this definition would be based on the proviso that the insured, through sickness or injury, is unable to do any normal physical domestic duties and will never be able to do so again.

Factors to be aware of

* You should ensure your insurance cover is adequate for your needs. Under-insurance can present a serious problem.

* Changes in your personal circumstances (ie. taking on additional debt, birth of a child) often necessitate higher insurance levels.

* There may be taxation consequences where a disability lump sum superannuation payout is made.