Your Guide to TPD Insurance

What is TPD insurance ?

Total and Permanent Disability (TPD) insurance is a type of life insurance that pays out while you are still alive. It’s a backup financial plan in case you experience a serious injury or illness and are unable to work again. There is no blanket definition of what constitutes a total and permanent disability, so each insurer may define it a little bit differently.

TPD pays out a lump sum that can be used to cover costs like loss of earnings, debts, and health care expenses following your injury or illness. It is usually bundled alongside your term life insurance, and can be purchased inside or outside of superannuation.


How Can TPD Cover Benefit Me?

An accident or unexpected illness can happen to anyone, and it can be financially as well as emotionally devastating. TPD insurance is there to take the financial pressure off, so you can focus on adjusting to life with your disability.

Depending on your policy, TPD may cover things such as:

  • Loss of limb or eye
  • Loss of sight or hearing
  • Brain injury
  • Cancer
  • Heart disease
  • Depression
  • Post-Traumatic Stress Disorder
Total and permanent disablement

In 2012, 33.6% of disabled people who are not in the labour force are permanently unable to work

Roughly ⅓ of all group TPD claims were musculoskeletal.

Musculoskeletal claims are twice as likely to be a claim cause than any other claim type.


When you are unable to work again, your finances can take a hit. There may be costs that you hadn’t considered, such as the need to make home modifications or hire a carer. Without your normal income, it can be very difficult to keep up with your expenses.

TPD can help cover costs like:

  • Regular cost of living: Utilities, rent, fuel, and groceries
  • Medical bills: Even with health insurance, medical bills can get overwhelming
  • Debts: Home loan, car loan, or business loan
  • Education: Yours or a dependant’s
  • Ongoing care: You may require home care or regular visits with a doctor
  • Home modifications: Ramps, rails, new light switches, or emergency alarms
  • Equipment: Wheelchairs, prosthetics, and other equipment can be expensive

If you would be unable to cover these costs without your income, TPD insurance could be a very important purchase for your family.


Defining Occupations for TPD Cover

A critical aspect of TPD cover is whether your policy is based on ‘own occupation’ or ‘any occupation.’ Let’s look at what these phrases mean.

Own occupation: Your TPD covers you if you’re permanently unable to work in your normal occupation. This is a more flexible definition, which means that it is easier to satisfy the ‘own occupation’ condition. However, it’s important to be aware that not all occupations are covered; for example, it is not practical for insurers to cover people in high-risk jobs.

Helen is a professional dancer. She is in a terrible car accident and loses the ability to use both legs. Although she is no longer able to work in her own occupation, it is conceivable that she could work in other occupations.

Fortunately, Helen’s TPD cover is defined as ‘own occupation,’ which means that she will be able to make a claim.

Any occupation: Your TPD covers you if you’re permanently unable to work in any occupation. This is a limited definition, and it is generally more difficult to meet this condition. As a result, policies with an ‘any occupation’ definition often have lower premiums.

Always read the terms and conditions of your policy for details on what is covered. TPD policies through superannuation after 1 July 2014 can only insure ‘any occupation,’ so it’s important to be aware of what you’re covered for.


TPD Cover for Non-Income Earners

TPD insurance recognises the contribution that homemakers make to a household. You do not have to be earning an income in order to get TPD cover. This is commonly known as TPD Home Duties, and it applies to those who look after domestic duties full time.

If something happens to the stay-at-home adult in a family it can be very costly. Someone else would have to perform that role, which either means having an income earner reduce their hours or paying someone to cover the home duties.


Purchasing a TPD Policy

There are a number of ways you can purchase a TPD policy.

Australians commonly bundle their TPD insurance with their regular life insurance. Many insurers will offer a discount when you have multiple policies with them. It’s also convenient to manage your life cover through a single insurer. However, be aware that if you make a TPD claim on a bundled policy, it may reduce your total benefit level.

If you prefer not to combine your TPD with other policies, you can always purchase standalone TPD cover. Though they may be more expensive, these policies tend to be more flexible. Making a claim will not affect the benefit level of other types of life insurance you may hold.

TPD through superannuation
Your super fund may offer TPD cover through a group insurance policy. With TPD cover through super, you’ll pay your premiums using pre-tax dollars, freeing more cash for your day-to-day expenses. TPD policies through super do tend to be more restricted, as new policies only offer the ‘any occupation’ definition of TPD.


TPD Claim Eligibility

Because of the nature of TPD cover, it may take some time to determine your eligibility for a claim. For the most part, you must have been unable to work for three consecutive months before making a claim, though it may be longer in some policies. In addition, most insurers will consider you to be totally and permanently disabled under the ‘any occupation’ definition if you can’t do at least two ‘daily living’ activities on your own.

Daily living activities
If you are unable to do at least two of these daily living activities, you may be considered totally and permanently disabled.


Get Dressed

Eat or Drink

Use the toilet


How Much TPD Cover Do I Need?

Everyone’s insurance requirements are different. When working out how much TPD cover you need, here are a few factors to look at:

  • Children: Consider how many children you have and their ages. If you plan to have more children in the future, you may need to re-evaluate your cover at that time.
  • Assets: Do you have any assets that could be sold or savings that you could use if needed?
  • Debts: If you have any money owing on a mortgage or other type of loan, your TPD cover can help with maintenance.
  • Cost of living: Determine how much you spend on a monthly basis for standard living expenses.
  • Level of insurance: If you already have a similar type of insurance through your super or in other forms, you might be able to get away with less additional TPD cover.
  • Income: Multiply your annual income by the number of years you expect to remain in the workforce.

How Can I Reduce the Cost of TPD Cover?

Your TPD premium is based on a number of factors, including age, gender, health, and smoking status. The healthier you are, the better chance you have of a lower premium.

Be wary of low-cost TPD cover that is offered without a medical exam; this cover may come with extra restrictions. On the other hand, submitting a medical exam can sometimes reduce the cost of a TPD premium if it shows that you are in good health.

Remember to disclose any health concerns or pre-existing conditions to your insurer before you sign up, as not doing so could affect your claim.

The golden rule of saving money on insurance is to shop around. Comparing prices on policies is a great way to find a deal on the cover you’re looking for.

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