Total and Permanent Disablement (TPD) Insurance

What is TPD insurance?

TPD cover pays a lump sum if you become totally and permanently disabled, as defined in your policy. The payment can be used to clear debts, adapt your home, fund ongoing care or medical treatment, and replace some of the income you would have earned over the rest of your working life.

TPD is often held alongside life cover, and in many policies the two are linked, meaning a TPD payment reduces the life cover by the same amount. It is different from income protection, which pays a monthly benefit, and from trauma cover, which pays on diagnosis of a specified condition.

Any occupation vs own occupation definitions

The definition of "total and permanent disablement" is the most important part of a TPD policy, because it decides whether a claim is payable. There are two common types of definition. The exact wording varies between insurers and policies.

Any occupation

Under an any occupation definition, you are generally considered totally and permanently disabled if you are unlikely to ever work again in any occupation for which you are reasonably suited by education, training or experience. This is a broader test, which means it can be harder to meet. Premiums are usually lower.

Own occupation

Under an own occupation definition, you are generally considered totally and permanently disabled if you are unlikely to ever work again in your own occupation. This is a narrower test, which may make a claim easier to meet for people in specialised roles. Premiums are usually higher, and this definition is not available for all occupations.

Many policies also contain other definitions, such as those relating to daily living activities or loss of limbs or sight. Understanding which definition applies to your policy is one of the most useful things a review can help with.

TPD inside super

Many Australians hold TPD cover through their super fund, sometimes without realising it. Holding cover this way has some features worth understanding:

• Premiums are paid from your super balance, which reduces your retirement savings over time
• TPD held inside super is generally limited to an any occupation style definition
• The insurer assesses the claim, and the super trustee also confirms that a condition of release has been met before paying the benefit
• Tax may apply to some TPD benefits paid from super, depending on your age and circumstances
• Default cover levels may not reflect your current debts or family situation

Some people choose to hold TPD both inside and outside super, for example with own occupation cover held outside super. Arrangements like these are often called super linked or flexi linked, and how they work differs between insurers.

How much TPD cover do people consider?

When thinking about a TPD amount, people commonly consider:

• Clearing the mortgage and other debts
• Medical, rehabilitation and care costs
• Home or vehicle modifications
• Replacing part of the income they would have earned until retirement
• Any existing cover inside super

How TPD claims work

TPD claims are often more involved than other claims, because the insurer needs to be satisfied that a condition is both total and permanent. In general terms, the process looks like this:

• Notify the insurer or super fund that you intend to claim
• Complete claim forms covering your condition, work history and personal details
• Provide medical reports from your treating doctors and specialists
• Provide employment and financial information, such as payslips or tax returns
• The insurer assesses the claim, which may include medical examinations arranged by the insurer
• If held inside super, the trustee also reviews the claim before payment

Many policies also require that you have been unable to work for a set period, often three or six months, before a claim can be assessed.

How Michael supports clients through TPD claims

A TPD claim usually comes at one of the hardest times in a person's life. Michael helps clients understand what is required, coordinates with the insurer, helps gather the right paperwork and keeps them informed at each step, so they can focus on their health and recovery. You can read more, including a client's own words about his TPD claim, on our claims support page.

How Harbour Life Insurance can help

Michael Shagrin is a life insurance specialist with over 30 years of experience. He can explain the TPD definition in your current policy, check where your cover is held, compare it across a range of insurers and provide options for you to consider. See our Insurance Review page for how the process works. Our service is free to you because Harbour Life is paid by the insurers.