What is total and permanent disability (TPD) insurance?

What is Total and Permanent Disability (TPD) insurance?

TPD insurance covers you if you become totally and permanently disabled and are unable to work due to those illnesses or disabilities. It is designed to help cover medical expenses and ongoing debts and bills that you'd struggle to pay if you were no longer able to work.

There are two different types of total and permanent disability insurance available:

• Your own occupation. You can claim it if you're unable to work again in the job you did before your disability. This cover is typically more expensive.
• Any occupation. This cover can be claimed if you can no longer work in any jobs suited to your education, training or experience. This cover is usually cheaper and less likely to pay out because say, for example, that you were previously a surgeon before disablement, you may still be able to work as a GP or doctor.

How does TPD insurance work?

1. A situation forces you to stop working

Common examples include loss of sight or hearing.

2. Your insurer assesses your claim

It'll look at your injury or illness and decide whether or not you may return to work.

3. Receive your lump sum payment

The payment is designed to cover medical costs lost income, help pay off debt and potentially allow you to adapt your home to your needs.

What's included in a TPD policy?

The specifics of a policy will vary by insurer, but here's a list of what you'll typically find.

• Total disablement benefit. This is the benefit that's paid if you're disabled due to an injury or illness and are unable to perform work duties.
• Partial disability benefit. This is the amount that is payable in the event of partial disablement, for example, loss of 1 arm, 1 leg or sight in 1 eye.
• Buyback option. If your TPD cover is part of your life insurance, when a TPD claim is paid, the amount will be deducted from your life cover amount – a buyback option lets you reinstate that amount.
• Death benefit. A benefit amount may be payable in the event of your death, even if your TPD cover is a standalone policy.
• Loss of independence feature. In some cases the lump sum payment available with TPD insurance can convert to a loss of independence payout, based on the insured's ability to care for themselves.
• Guaranteed future insurability. This feature allows you to increase the coverage of your policy during important life events, such as marriage, children or mortgage, without needing to undergo another medical examination, even if your health situation has changed.
• Indexation benefit. Sum insured will increase annually in line with the Consumer Price Index (CPI) to keep up with inflation.
• Premium freeze option. This option allows you to choose to retain your current annual premium under a stepped style when you reach a certain age and it will reduce the insured amount gradually.

How to buy TPD insurance

TPD insurance can be purchased as standalone cover, or added to a life insurance policy. If you buy it as part of a life insurance policy, then your life cover will be reduced by any amount paid out for a TPD claim.

TPD cover can be purchased directly from life insurance providers or via a broker or financial adviser. Or, you may have access to cheaper TPD cover through your super.

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Product AUFLI	Maximum Cover	Minimum Cover	Maximum Entry Age	Expiry Age	Stand alone or Add on policy	hide
Promoted TAL Accelerated Protection Life Insurance Finder AwardBonus	No set limit	Not stated	74	99			Our verdict: One of Australia's leading life insurers. Automatically includes child critical illness cover. Plus, it comes with a level premium option (e.g. costs remain similar as you get older). ⭐ Current offer: Get up to 15% off your TAL Life, Trauma or TPD insurance policy for life - if you have a Body Mass Index (BMI) between 19 and 28 at the time of your application. Offer T&Cs on insurer website apply.	Get QuoteView details Compare	loading Fetching your data...
TAL TPD Insurance	3,000,000	Not stated	62	65	Standalone or Policy add-on		Choose up to $3 million in coverage. If you’re building a policy with TAL, it’s good to know there are a range of perks included with your life insurance. Examples include a counselling benefit and premium suspension cover. Plus, the option to add coverage for your kids.	Get QuoteView details Compare	loading Fetching your data...
Medibank TPD Insurance	$1,500,000	$50,000	60	65	Policy add-on		Secure up to $1.5 million in TPD cover by choosing Medibank. This was more than 7 other providers (out of 14) we reviewed. Medibank health members can score 10% off their life insurance premiums.	Get QuoteView details Compare	loading Fetching your data...
ahm TPD Insurance	$1,000,000	$50,000	55	65	Policy add-on		With ahm, you can add up to $1 million in TPD insurance to your policy. You can buy online and there’s no medical exam. Keep in mind that Medibank offers an extra $500k – worth considering if your needs are greater.	Get QuoteView details Compare	loading Fetching your data...
Real Insurance TPD Insurance	$1,000,000	$50,000	59	65	Policy add-on		Real Insurance offers up to $1 million in TPD cover. This is pretty competitive versus the market. You can also boost your cover by adding as much as $500k in critical illness insurance.	Get QuoteView details Compare	loading Fetching your data...

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How premiums work for TPD insurance

There are typically two ways that you can pay your premiums. Not all insurers will offer both options but some do.

• Stepped premiums: How much you pay for your policy increases each year by a certain percentage.
• Level premiums: Your insurance generally won't increase in price as you get older, though it will increase in line with inflation. You'll usually pay more in the beginning but they offer more certainty over time.

What to consider when purchasing a TPD policy

Calculate how much cover you'd need

You can do this by making a list of all your debts and ongoing expenses. To understand how much you'd need cover for, check how much it'd cost to be able to afford these expenses without your income.

Your level of health insurance

Depending on the level of health insurance you hold, a large chunk of your hospital bills may be covered by this. If you don't have health insurance, you may like to factor this in as a potential expense.

Family assistance

If something were to happen to you, what kind of family support is available to help you? Consider if you would need to factor in costs for some kind of childcare.

FAQs

• How much is the total and permanent disability payout?

  Most insurers have a maximum payout of between $1m - $5m. Your exact payout would depend on what amount you've selected based on your needs.

• What qualifies as total and permanent disability?

  Any injury that makes it impossible to do our job. Typically, this includes things like loss of sight, loss of limbs, paralysis and more.

• Is it hard to get a TPD payout?

  This will depend on the nature of your claim and the insurer you've chosen. Data from the Australian Prudential Regulation Authority (APRA) shows that it can take up to 7 months for a TPD claim to be paid out. Additionally, if you bought your policy through a broker, there's an average claim acceptance rate of 83.5%. If you bought your policy via your super, theres an average claim acceptance rate of 92.3%.

• Do TPD payouts affect Centrelink?

  Generally TPD payouts won't impact your Centrelink payments, particularly if that insurance is held within super and you are under pension age. However, a TPD payout is a form of income and you should always report any changes in circumstances to Centrelink and seek advice from it directly.

• If I suffer a partial disability, can I make a claim for TPD?

  You may be able to, depending on the specifics of your policy. Some insurers will pay out for income that's lost if you can only work at a reduced capacity because of sickness or injury.

  Also, some policies provide partial payment if you suffer certain disabilities. For example, after the loss of limbs or loss of sight.

• Do TPD policies have a waiting period?

  Depending on the policy you choose, you may be required to be unable to work because of an illness or injury for at least 3 to 6 months, before you start receiving any benefit payouts.

Written by

Gary Ross Hunter

Editor, Insurance

Gary Ross Hunter was an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio

Gary Ross's expertise

Gary Ross has written 644 Finder guides across topics including:

• Health, home, life, car, pet and travel insurance
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Co-written by

Peta Taylor

Publisher of Insurance

Peta Taylor is a publisher at Finder, working across all of insurance. She's been analysing product disclosure statements and publishing articles for over 2 years. Peta is passionate about demystifying complex insurance products to help users make well educated decisions with confidence. Peta is part of Finder's insurance awards team and works alongside editorial and insights experts to bring users the best insurance products every year. See full bio