What is TPD Insurance?

The future is hard to predict, so it’s best to be prepared financially should any untoward events happen to you. A major illness or a debilitating injury could result in loss of income and bring financial hardship to you and your family. This is when insurance cover for Total and Permanent Disability (TPD) becomes essential to provide financial support and protection.

In this quick guide, we’ll go over the basics of TPD insurance, including how it works, its benefits, and whether you need it or not.

TPD Insurance Defined

Total and Permanent Disability (TPD) insurance is a type of insurance policy in Australia that pays a lump sum if you become totally and permanently disabled.

TPD covers a range of disabilities, including both physical and mental conditions, and is designed to help you pay for living expenses, medical bills, and rehabilitation costs.

However, the specific conditions covered and the benefits provided can vary depending on the policy, so it’s important to carefully read and compare policy disclosure statements to understand what is and isn’t covered.

TPD Insurance Coverage: How it Works

TPD insurance is often offered as part of a superannuation account, so check whether your super already has a TPD component. In this instance, TPD premiums are taken out of your super account balance.

You also have the option to purchase TPD personally from insurance companies as a standalone policy or as an add-on to your existing life insurance.

Take note that in most cases, TPD insurance cover within super typically expires at age 65 however some policies do offer cover up until age 70. In addition, selected providers will continue to offer the policy under a non-working definition from age 65 or 70, enabling you to retain the cover until age 99.

To claim a TPD benefit, the specific definition of total and permanent disability as stated in your policy must be met. This definition may vary between policies.

Generally, however, your insurer will look at 1) whether you are unable to work in your usual occupation (‘own occupation’) or any other occupation (‘any occupation’) for which you are reasonably suited based on your education, training, and experience, and 2) that this disability is likely to be permanent:

Own occupation – provides benefits if you are unable to work in your own occupation or a similar occupation that you are trained and educated for. This type of cover typically costs more than “any occupation” cover as it offers greater protection and a lower threshold to qualify for benefits.
Any occupation – provides benefits if you are unable to work in any occupation that is suited to your education, training, or experience. This cover is cheaper than ‘own occupation’ cover but has a higher threshold for qualifying for benefits as it requires a greater level of disability.¹

It is also important to note that TPD insurance policies can have waiting periods before you can make a claim and that there may be exclusions and limitations in your policy.

Benefits of TPD Insurance

Should an injury or illness leave you with a permanent disability that prevents you from working, TPD insurance can provide you with significant benefits, such as the following:

Permanent inability to work in any occupation benefit

Typically, you will receive a lump sum payment that you can use to cover your living expenses and medical costs. It is advantageous if you have dependents or family members who rely on your income.

Major physical impairment benefit

If you suffer a major physical impairment, such as the loss of a limb or sight, TPD insurance provides a lump sum payment to help you pay for medical expenses or necessary modifications to your home or vehicle to accommodate your new needs.

Life Cover Buy-Back

This gives you the option to buy back life cover in the event that you recover from your disability. It allows you to reinstate your life insurance coverage without having to go through a new medical examination or submit a new application.

Inflation Proofing Increases

This lets you adjust your coverage amount to keep up with the rising cost of living, helping to ensure that your coverage remains sufficient and relevant over time.

Guarantee to Continue Cover

As long as you continue paying your TPD insurance premiums, your coverage will remain intact, regardless of any financial or health challenges you may face.

Do you Need TPD Insurance?

To determine whether you need TPD insurance, consider the potential expenses that may arise due to your unexpected disability, and compare it with your financial capacity to cover those expenses.

Here are some questions to ask:

Do you have sufficient savings and investments? Would your non-salaried income now and in the future be able to support yourself and your family?
Do you have dependents who rely on your income?
Do you have financial obligations like a mortgage or debts? How will you provide for ongoing living expenses?
How much income you and your dependents would need to keep your lifestyle should a permanent disability prevent you from working again?
Would help from family and friends be readily available to you in the face of income loss?
What other types of cover do you already have? Do you have private health insurance, trauma insurance, or insurance through your super?

How much TPD insurance do I need?

The amount of TPD you’d need would depend upon your circumstances. Broadly, the difference between the number of expenses you would incur if you are permanently unable to work again, and your financial capacity to cover these expenses, will give you an idea of how much TPD cover you’d need to fill in the gap.

A Wealth Protection Specialist can help you determine what level of cover and which policy would be best suited to your needs. They will take into account factors such as income, debts, expenses, and dependents, and can provide you with a quote of how much insurance will adequately protect you and your family in the event of total and permanent disability.

Talk to the Experts at NFPG About Your TPD Insurance Needs

TPD insurance is a valuable financial tool for securing yourself and your loved ones against the risk of unexpected permanent disability and income loss. If you’re thinking of getting TPD insurance, be sure to evaluate your unique needs and choose a policy that suits your own personal circumstances.

If you need insurance advice in Newcastle, turn to Newcastle Financial Planning Group. We are here to offer trusted financial advice to protect you and your family. Call us or book online to secure your first appointment with us today and learn how we can work together to achieve your financial freedom!

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