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Total and Permanent Disability Insurance (TPD)
Written by
Shaun McGowanTotal and permanent disability (TPD) insurance cover provides financial support if an injury or illness leaves you permanently disabled.
Every TPD policy is different and before buying you’ll need to find one that suits your needs and circumstances.
What is Total and Permanent Disability Insurance?
TPD insurance guarantees a lump sum payment if you suffer a serious injury or illness that leaves you permanently disabled and unable to work.
This payment can help make life easier for you and your family, covering medical care, debt repayments, living costs and more.
You’re required to pay premiums, regular payments to your insurer, who in return will guarantee to pay out under your policy.
What is the maximum benefit amount for TPD insurance?
The maximum benefit amount for TPD insurance differs depending on which insurer you go with but most are around $3 million.
Every insurer’s definition of total and permanent disability is different, and each TPD policy is unique.
Always check your product disclosure statement and speak to your broker/advisor before buying so that you know what you’re covered for.
What’s covered by TPD insurance?
TPD insurance is paid out in a lump sum and can be used for anything the policyholder chooses. Usually, policyholders use the payment to cover:
- Medical care
- Living costs
- Special transport requirements
- Debt repayments
- Loss of income
- Renovation costs to make your home more accessible
- Any other costs that arise
One of the most important things to consider when buying a TPD insurance policy is, how much money you might need to cover those costs if the unexpected happened.
Once you’ve got a clear idea you’ll be able to buy a policy with the right level of cover.
Own occupation or any occupation TPD cover?
There are common definitions of TPD - any occupation and own occupation - the main difference between the two is the circumstances in which the policy will payout.
- Any occupation. Pays you a lump sum if you become permanently disabled and are unable to work in any job that is suited to your skills and experience.
- Own occupation. Pays you a lump sum if you become permanently disabled and are unable to work in your current occupation.
Own occupation TPD tends to be the more expensive option, generally because a payout is more likely.
The type of TPD that is right for you will depend on your profession and your circumstances.
The cost of total and permanent disability insurance
Every TPD insurance policy is different and will have different monthly premiums. The factors that affect the cost of your premiums usually include:
Policy details affecting the cost of TPD insurance
- The benefit amount
- The level of coverage
- Policy exclusions
- Whether you’ve chosen ‘own occupation’ or ‘any occupation’ cover.
Personal details affecting the cost of TPD insurance
- Whether you’re a smoker or non-smoker.
- Occupation.
- Medical history.
- Family medical history - especially any genetic inheritance disorders such as heart disease or cancer.
- Whether or not you partake in any high-risk activities (i.e. skydiving).
You’ll be able to make decisions concerning your policy that’ll affect the price of your monthly premiums - such as changing the benefit amount, type of cover or level of cover.
The cheapest TPD insurance policy isn't always the best option - cheap policies may have more exclusions and/or a lower benefit amount.
How to compare total and permanent disability insurance policies
Always shop around and compare total and permanent disability policies before choosing.
Look at each policy in as much detail as possible to decide which is most suitable to your circumstances and needs.
- Premium amount
- Waiting period
- Level of coverage and exclusions
- Customer service
- Benefit amount
- Flexibility
- Inflation proofing/benefit indexation
- Partial disability benefit
- Death benefit
- Future life events
Learn more about how to compare life insurance policies before you buy.
Eligibility for total and permanent disability insurance
To secure a TPD policy you will have to meet certain eligibility criteria. This differs between insurers but usually includes:
- Minimum age: usually 18
- Maximum age: 55 to 60
- Pre-existing conditions: if you have any pre-existing conditions that increase your risk level as a policyholder the insurer may deny your cover or choose to not cover you for the specific illness.
- Underwriting: every insurance policy is subject to underwriting - where a professional analyses the risks involved with insuring you.
If you are deemed to be high risk because of lifestyle or other factors (i.e. smoking, recent serious illness) you may be denied cover, your premiums may be set higher and/or you may be denied cover.
Every insurer has different eligibility criteria and assesses risk in its own way.
If one insurer denies you cover there’s a good chance another will accept you, particularly if you apply through a broker or advisor.
Do you need total and permanent disability insurance?
- Am I likely to make a claim?
The younger and healthier you are, the less likely you are to make a TPD insurance claim.
That’s why if you’re under 30, healthy and work in a low-risk profession you may have a lesser need for TPD insurance.
According to Experian, the most common TPD claims are due to the following conditions:
Musculoskeletal
Accident
Mental health
Cancer
Cardiovascular
Other conditions
- Does my family depend on my income?
One of the biggest questions to ask when considering insurance is whether your family depends on your income to live.
If the answer is yes, keep that in mind whether or not to purchase cover.
- How much are my monthly debt repayments?
Your level of debt should be another big factor when considering whether or not TPD is for you. Would you be able to make your repayments if you were unable to work?
- Could I afford medical care if I became disabled?
Medical and everyday care can be expensive if you become disabled. Could you afford this?
- Does my existing insurance cover disability?
Before you buy any additional policy take a close look at your existing insurance. Does your policy include any cover for TPD or traumatic illnesses and injuries already?
- What support do I have available?
If you have a supportive family who are willing to take care of you and the financial means to support yourself you may have a lesser need for TPD.
- Can I afford the premiums?
Paying your insurance premiums should not cause you financial stress.
Total and Permanent Disability Insurance FAQs
How can I make a TPD claim?
If you have suffered an illness or injury that may leave you disabled and you have a TPD policy contact your insurer to make a claim. Usually, you’ll be eligible to make a claim if:
- Your disability is total and permanent (you may be eligible for a partial claim if it’s not permanent).
- You’ve passed the waiting period on your policy.
- You’ve lost some level of independence.
TPD claims tend to be a lengthy process as insurers want to make sure that your disability is permanent before paying out.
What’s the difference between trauma insurance and TPD?
The main difference between trauma insurance and total and permanent disability (TPD) insurance is their intended purpose.
- Trauma insurance is meant to cover the costs that arise as you recover from a traumatic injury or illness and get back to work.
- TPD on the other hand is meant to cover the ongoing costs of managing an illness or injury so serious that you will never be able to go back to work.
How can I buy TPD insurance?
TPD insurance is available from most major insurers in Australia. Most retailers offer the option to purchase TPD online but some will require you to visit a physical branch.
It’s up to you whether you arrange your TPD insurance:
- Directly from a life insurance company.
- Through a broker.
- Through an arrangement with your employer.
- Or through your superannuation scheme.
What if I already have insurance and want to add TPD?
Usually, TPD insurance is bundled with other life insurance policies such as death cover and income protection insurance.
Many insurers offer a discount if you bundle more than one policy so make sure to check with yours so that you don’t miss out on savings.
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About the Author
Shaun
McGowan
Shaun McGowan
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.
