29 May 2012
Total & Permanent Disability Insurance
TPD is a form of insurance that is designed to protect you and your family financially if you were to suffer an illness or injury that leaves you unlikely to ever return to work.
There are a number of options which can affect your TPD claim, and we will cover these options in today's article.
When and how does it help?
If you were to suffer a serious injury or illness that left you unable to return to work ever again, how would you and your family survive financially?
Many Australians would end up on a disability pension, but would this be enough to keep paying the mortgage and maintain your lifestyle? For most people the answer would be a resounding no.
TPD insurance helps by providing you with a lump sum amount in the event that a doctor declares that you are unlikely to ever return to work due to your injuries or illness.
The funds from your TPD insurance claim can be used to repay your mortgage or any other debts, cover expensive out-of-pocket medical expenses and rehabilitation costs, and generally provide a financial buffer or potentially replace your income.
When it comes to replacing your income, most financial advisers would recommend an income protection policy rather than relying on a TPD policy. TPD is better used as a buffer rather than a complete replacement for your long term income.
TPD Insurance Options
There are a number of options which can affect your TPD insurance coverage as well as the cost of your cover.
The main option is deciding on exactly how much cover you need, but of equal importance is deciding on which TPD definition you should go for.
The two definitions available for TPD insurance are own occupation and any occupation. Which option you choose could have a major impact on any claim you make.
This is the most common of the two TPD definitions. With this definition, you policy will payout if you are unable to work in any occupation to which you are suited by experience or qualifications.
Even if a doctor believes that you could never return to your old job, if they believe that you could return to another job (even if it was lower paying) the insurer may not pay your claim.
Own occupation is the more comprehensive of the two definitions, and is also the most costly of the two.
With this definition, your policy will payout if a doctor believes that you are unable to return to your own occupation due to a serious illness, injury or other condition.
The difference in real life
A good example for explaining the difference between the two definitions is to consider the case of a surgeon who has lost the use of one hand.
With an any occupation policy the insurance company may state that the surgeon could still work as a hospital manager, a university lecturer or some other role in the medical field. In that case the claim would not be paid.
But with an own occupation policy, it would be clear that the surgeon could not operate on people with only one hand, so the policy would payout his or her full claim.
As you can see, the difference between the two definitions can be major in the event of a claim.
TPD Insurance Quotes
If you are looking for quotes on your TPD insurance there are a number of ways you can go.
Financial advisers can assist with quotes as well as choosing the best value policies, whilst some people prefer to contact the insurance companies directly to cut out the middleman.
There are also a number of websites available that offer quoting and comparison services for TPD insurance.