Total and permanent disability insurance, as the name suggests, is a type of life insurance which provides a lump sum payment if the life insured suffers an illness or injury which prevents them from ever returning to work again. This could be as a result of losing the use of your legs in a car accident or suffering a stroke.
Upon an approved claim, the policyholder will receive a lump sum benefit. There aren’t any restrictions on how you use those funds; you may choose to spend it on living expenses, like food and bills, or to pay off medical expenses. TPD cover is particularly useful if you need to make modifications to your home, like installing a ramp for wheelchair access or if you need to pay for a carer.
Why compare life insurance through Savvy?
We’ve partnered with Compare Club to bring you a range of life insurance policies to help you compare them side by side.
What does TPD insurance cover?
Each insurer defines disability differently, so it’s important to read your policy document carefully and compare them with Savvy. However, your TPD insurance will fall into one of two main categories:
- Any Occupation: applies if your disability prevents you from doing any type of work suited to your experience, education or training.
- Own Occupation: applies if your disability prevents you from working in your current occupation, but you may still be able to complete other work suited to your experience, education or training.
This means you may be able to claim for partial disability, provided you have an Own Occupation policy and prove to your insurer that you aren’t able to complete any work in your current position. If you have an Any Occupation policy, you may still be able to claim for partial disability, though it may be more difficult to receive a payout on the basis that your insurer may deem that your disability doesn’t rule you out from all types of work.
In terms of what isn’t covered, you won’t be able to claim for a disability which prevents you from working temporarily, rather than permanently. This may be a condition which requires a few months or years to recover from. Your family also won’t be able to claim in the event of your death, nor will you be covered if you receive a serious illness diagnosis which doesn’t permanently prevent you from working.
All coverage is subject to your insurer’s terms and conditions, so it’s important to check your PDS and with your insurer if you’re unsure of what can be covered under your policy.
How much does TPD insurance cost?
The cost of your premiums will be based on a variety of individual factors and is largely determined by how different insurers assess your risk profile. The insurer will usually ask for the following information when you apply for a policy:
- Age: the older you are, the more expensive your premiums are likely to be.
- Profession: if you work in a profession with a higher risk of injury/illness causing permanent disability, you may have to pay higher premiums.
- Medical history: insurers will look at areas such as your weight, blood pressure and cholesterol, in addition to determining whether you have any pre-existing conditions which could put you at greater risk of disability. Those who are deemed at a higher risk of making a claim are likely to pay more for insurance.
- Family medical history: if you have a family history of certain inherited disorders, such as cancer, haemophilia and cystic fibrosis, you may have to pay more for your insurance (though this will depend on your insurer and the terms and conditions of your policy).
- Lifestyle: this includes factors such as whether you smoke or participate in higher-risk sports like rugby. Because these increase your chances of getting ill or injured, you may be charged a higher premium if these apply to you.
- Cover amount: the greater the payout you insure yourself for, the more you’re likely to pay in premiums.
Why do I need TPD insurance?
Life insurance can be crucial in helping your family recover financially. If you’re unable to work, you’ll need to think about how you’ll cover your expenses. Do you have enough savings and assets to be comfortable? Will you have enough money to pay for medical bills, long-term therapy and modifications to your home? If your answer to either of these questions is no, you may need TPD insurance.
Here are just some of the ways TPD insurance can help you:
- Living expenses: if you can’t work anymore, or you can only work in a reduced capacity, you may need to rely on your TPD benefit to cover your daily expenses.
- Debts: do you have a mortgage, car loan or credit card debts which you need to pay off with your TPD benefit?
- Medical and rehab expenses: though Medicare covers most medical costs, it doesn’t cover everything, so you may need to draw on your TPD benefit to cover the gap.
- Modifications to home/vehicle: you may need to modify your home to suit your disability, such as installing ramps for wheelchair access.
- Professional assistance: you may need carers or cleaners to help you manage daily tasks which you can’t do yourself anymore.
- Future expenses: this could involve planning for retirement, supporting your dependents and providing for their future education expenses.
The pros and cons of taking out TPD insurance
Pros
-
Lump sum benefit
If you’ve made a claim and it’s been approved by your insurer, you’ll receive your benefit as a one-off lump sum, potentially allowing you to pay for costly expenses such as modifications to your home or expensive equipment.
-
Cheaper premiums
TPD Insurance is generally cheaper than other types of insurance, such as income protection, though the cost will depend on your risk profile as determined by your insurer.
-
Tax-free benefits
You generally won’t need to pay tax on the amount you receive from your TPD policy, as these insurance payouts are typically tax-free.
-
Greater peace of mind for your family
If you become permanently disabled due to a covered injury or illness, you can rest assured you and your family can receive your policy’s payout to add greater financial support.
Cons
-
Temporary disabilities not covered
TPD insurance only covers you if you become permanently or completely incapacitated and won’t cover you if you sustain a temporary disability. In this case, income protection may be a more suitable policy to hold.
-
Not all pre-existing conditions will be covered
If your pre-existing condition is deemed a significant enough risk, it may be excluded from your coverage entirely (or available with additional loading).
How to buy a life insurance policy through Savvy
-
Get a quote
Tell us about yourself and the policy you’re after, such as your date of birth, contact information, whether you smoke, your job and how much coverage you need.
-
Compare your options
Compare offers and premium estimates from trusted Australian insurers. After you’ve picked one, you can schedule a call back with a specialist to talk through your policy.
-
Purchase your policy online
If you're happy with everything, you can go ahead and complete the purchase online with the relevant personal and payment details. It really is that easy!
How do I compare TPD insurance policies with Savvy?
-
Inclusions and exclusions
If you suffer from a pre-existing condition, it’s particularly important to compare policies to determine whether disability stemming from your condition can be covered. This may be automatic, available as an optional extra or excluded entirely, so it’s worthwhile comparing in this area if you find yourself in such a position.
-
Premium cost
It’s important to consider equivalent policies based on their cost. While the cheapest policy may not always present the best deal for your needs, it’s still important to compare offers so you can potentially avoid paying more than necessary for your coverage.
-
Premium type
The older you are, the more expensive your insurance is likely to be. For this reason, TPD premiums can change over time. These are the two main types of premium available: stepped premiums and level premiums. Stepped premiums gradually increase with age, while level premiums only rise with inflation. This could mean stepped premiums are cheaper when you're younger, but level premiums are cheaper when you're older.
-
Covered amount
It’s important to consider how much financial coverage you may need if you become permanently disabled, particularly if you’re no longer able to earn a living. Depending on your profile and the insurer you choose to purchase your policy with, you may be able to select a maximum benefit of up to $3 million to $5 million, though you’ll be able to select smaller amounts if you don’t need as much coverage.
-
Additional benefits
Beyond just the amount you’re covered for, it’s important to look further into your insurer’s added benefits and extra inclusions. For example, some insurers offer inflation-proofing, which increases your covered amount in line with inflation each year.
-
Waiting periods
TPD insurance may come with a 90-day waiting period from when you take out your policy before you can make a claim, but this may not be the case with all insurers. It’s important to consider different policies based on their waiting periods to determine which may be more suited to your needs.
