Key Points
TPD and income protection insurance are different. TPD insurance offers a lump-sum payment for permanent disabilities, whereas income protection insurance provides ongoing income replacement during temporary periods of incapacity for work.
There is also a difference between TPD and trauma insurance. Trauma insurance provides a lump-sum payment if the policy holder is diagnosed with a critical illness or medical condition, regardless of the policy holder’s ability to work.
Total and Permanent Disability (TDP) insurance is a type of life insurance that pays a lump sum if the policy holder becomes totally and permanently disabled due to an illness or injury and is unable to work again.
It is intended to provide financial support you may need to cover medical expenses, ongoing care, and to replace lost income due to your disability.
However, exactly what constitutes a total and permanent disability can vary between insurers. That’s why it's important to compare insurers
A Guide To Total and Permanent Disability (TPD) Insurance In Australia
Compare & SaveCosts Associated with TPD Insurance
TPD insurance premiums are calculated on your individual risk profile, and vary widely between insurers.
Factors like your age, gender, occupation, lifestyle and medical history are all typically considered by insurance companies when they’re calculating the cost of your TPD insurance policy.
Why compare TPD Insurance?
The best TPD cover for one person may not be suitable for somebody else. So don’t bet your future on a single TPD insurance quote.
To compare multiple TPD policies, it's good to have an idea of how much you want to be covered for, how long you want to be covered for, and what type of policy you need.
And some super funds may not provide TPD insurance to new members aged under 25 or if your super account balance is under $6000.
The experts at Compare Club can run a death and TPD insurance comparison to help you find the TPD cover you want.
Waiting Periods for TPD Insurance
Policy holders typically need to serve a waiting period after making TPD insurance claims.
This is the length of time you must wait after the occurrence of the total and permanent disability before you can lodge a TPD claim.
The length of waiting periods (before you can claim) can vary from around two to six months depending on the terms of your policy, so consider this when you’re comparing TPD insurance cover.
Benefits of TPD insurance
TPD insurance is designed to ensure your financial security if you are unable to work ever again due to a total and permanent disability.
You can use the lump sum to pay for medical bills, cover your living costs, look after your family, or pay off significant debts, like your mortgage, if a serious illness or injury permanently prevents you from working.
Who is TPD insurance right for?
TPD insurance is for anyone who wants financial security in the event of an illness or injury that takes away your ability to work.
However, it’s important to note that there are three different types of TPD insurance – Own Occupation and Any Occupation TPD insurance. These have significantly different TPD insurance meaning.
Own Occupation pays out if you make a claim because you can't work permanently in the occupation you’re working in at the time of your claim.
Any Occupation pays out if you make a claim because you can't work permanently in any occupation that matches for your experience, education or training.
Activities of Daily Living (ADL) pays out if you unable to perform at least two of six activities of daily living. Some of these include: feeding yourself & bathing yourself.
Types of Life Insurance
Life Cover Also known as: Term Cover, Death cover What it does: Pays a nominated person a lump sum if you die or develop a terminal illness. | Trauma Cover Also known as: Critical illness cover What it does: Provide a lump sum for certain injuries or illness like cancer or heart attacks. |
Total and permanent disability cover Also known as: TPD What it does: Pays a lump sum if you can't work again due to permanent illness, injury or disability. | Income protection Also known as: IP What it does: Pays up to 70% of your usual income if illness or injury means you can't work |
TPD won't cover any of the above but you can buy multiple life policies to cover you in all worst-case scenarios.
Compare & SaveDo you need TPD if you have income protection?
Income Protection and TPD cover different things and it's common for people to take out both types of cover if they feel they need it.
Income protection insurance is designed to keep a portion of your normal income flowing in during a temporary injury or illness.
TPD insurance, on the other hand, is a financial boost paid in a lump sum. It can be used for things like adapting your house, paying off your mortgage, or covering on-going living expenses.
What's the difference between Any and Own Occupation definitions in TPD?
When you take out a TPD policy you'll either have an Own Occupation policy or an Any Occupation policy.
It's worth checking whether your policy is Own or Any Occupation as it affects whether or not you'll get a payout.
As a rule of thumb:
Own Occupation pays out if you make a claim because you can't work permanently in your own occupation at the time of your claim.
Any Occupation pays out if you make a claim because you can't work permanently in any occupation suitable for your experience, education or training.
What does any occupation and own occupation mean?
Meet Kat. She's a mechanic. She badly injures her arm in an accident and is unable to work as a mechanic again.
Own Occupation: | Any Occupation: |
|---|---|
Kat can claim on an Own Occupation TPD policy. She was working as a mechanic when she was injured and cannot return to this job. | Kat can only claim on an Any Occupation TPD policy if she cannot work in any occupation she has experience, education, or training in. |
Kat used to work in a call centre before becoming a mechanic. Her Any Occupation claim may be denied if she could still work in a call centre.
The main difference here is in an Any Occupation policy, insurers may decide you're still fit to work based on your education, training and experience.
Essentially, you have a much higher barrier to claiming under an Any Occupation policy.
Compare & SaveCan I get TPD through my super?
Yes, many super funds have TPD included automatically.
It's worth noting that TPD insurance through super funds will always be Any Occupation cover only, as Own Occupation isn't available through super.
In addition, some super funds may make you do an Activities of Daily Living (ADL) test to assess the severity of your disability.
That means they may only pay out if you are unable to feed yourself, move or walk independently, and complete basic personal hygiene tasks.
The level of TPD in super can also vary wildly, prompting the Australian Securities and Investments Commission (ASIC) to issue a warning over the large differences between default TPD cover and costs in super.
For some people, their super fund's TPD may be enough for them.
But it's worth taking time to explore what cover you have in your super, what it covers you for and how much of your retirement savings are paying for it.
If you think you're getting a poor deal through your super, but would still like TPD cover, our team at Compare Club can help compare policies for you.
Can you work again after claiming TPD?
Yes. If your insurer agrees that you have satisfied the terms of your TPD policy and you receive a payout, you can work again if you make a sufficient recovery.
How long do TPD claims take?
Claim timelines differ between insurers, but it usually takes around two to three months for a straightforward TPD claim to be approved.
It can take longer if you have a more complex claim.
Can you claim TPD for partial disability?
You can, but it depends on your ability to work.
If your insurer is satisfied that you're unlikely to be able to work again due to your disability, then you will get a payout.
This is where Own and Any Occupation comes in.
Own Occupation holders are likely to be successful in claiming if they can show that they can't work in their current occupation.
If you hold Any Occupation, then your insurer may reject your claim if they take the view that you could do another job that fits your training, education and career background.
Can you claim TPD for mental illness?
Yes, you may be able to claim for a mental illness that stops you from working but it depends on the terms of your TPD policy.
Not all TPD policies include mental illness.
Could your TPD claim be disputed?
Yes. Your insurance company will dispute your claim if they believe it doesn't satisfy the terms of your TPD policy.
That's why it's important to read and understand the product disclosure statement, and to know what you are and aren't covered for.
Don't worry, though.
Our specialists at Compare Club can help make sure every element of your TPD policy is clear to you and you know what you're covered for and what's excluded.
Compare & SaveKey Terms
Activities of Daily Living (ADLs): Some TPD insurance policies use ADLs as criteria for determining eligibility for benefits. They typically assess the policy holder’s ability to perform basic tasks necessary for independent living.
Exclusions: Some pre-existing medical conditions, self-inflicted injuries, or disabilities resulting from certain activities or behaviours may be excluded from TPD cover. Specific exclusions tend to vary between policies.
Policy limit: This is the maximum amount of TPD insurance benefits that can be paid out under the policy. Policy limits may vary between policies.
Frequently Asked Questions
What does TPD cover?
TPD insurance provides financial protection in the event that you become totally and permanently disabled and are unable to work again. The specific coverage provided by TPD insurance can vary depending on the terms of the policy, but typically includes a lump-sum payment, income replacement, and/or coverage for medical expenses and ongoing care.
Do I need a TPD insurance calculator? A life insurance calculator like this one can certainly make it easier to work out how much TPD insurance you need.
Is TPD insurance tax deductible? TPD insurance premiums may be tax deductible if you hold TPD insurance through your superannuation fund. However, if you hold a TPD insurance policy outside of your super fund, premiums are generally not tax deductible.
Additional resources
Use this life insurance calculator to work out how much TPD insurance you need.
TPD insurance is just a quick click away.
Disclaimer
Compare Club compares selected products from a panel of trusted insurers. We do not compare all insurers or products in the market.
This information has been prepared by Compare Club Australia Pty Ltd, authorised representative of Alternative Media Pty Ltd, AFS Licence number 486326, www.compareclub.com.au. It is of a general nature only and does not take into account your individual needs, objectives or financial situation. Before making a decision about a life insurance product, you should consider the relevant PDS.
