In Australia, TPD (Total and Permanent Disability) insurance provides a financial safety net if you suffer a serious illness or injury that prevents you from working long-term. It pays out a lump sum benefit that can help cover medical bills, living expenses, and modify your home to accommodate your disability.
That's the skinny - if you need more info then hit up our main guide in TPD insurance.
| Response | Male | Female |
|---|---|---|
| Peace of mind | 4.08% | 2.99% |
| I have financial dependents | 2.6% | 0.7% |
| I have a mortgage | 2.04% | 1.93% |
| Other | 0.74% | 0.7% |
| I'm self-employed | 0.19% | 0.35% |
| I'm worried about being made redundant | 0.19% |
Maths is hard, so some of our egg heads built this calculator to help. It should give you a ballpark figure for how much TPD coverage might suit you. Remember this is only a starting point - have a good think about your personal situation, and chat to a broker if you're worried.
Like any insurance, working out how much cover to take out is one of those 'it depends' questions. You'll want to assess how your life, and those of your dependants, could be affected in the event of you becoming totally and permanently disabled. At its most simple, you'll want to list out your expenses and income sources that would be left over if you needed to claim.
Open your notes app and write out all of your current financial obligations, plus any that you can think of in the future
The next step to take is to calculate other sources of finances you'd have after you stop working. Do you have any savings or investments you could rely on? Would you get any other payouts, such as from an income protection policy? It's possible, depending on the injury and your TPD policy, that you might still be able to work in a different field, but it is hard to know how likely that is to happen before the hypothetical injury actually happens.
The difference between what you'd have and how much you'll need to fund your financial obligations and lifestyle can help to guide you in how much TPD insurance you may require.
At this point, it's quite possible your best bet is to make a TPD insurance application and see how you fare. The application process has a lot more information on what TPD actually covers. If you're ready to start an application, you can compare from some TPD products in the table below.
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While standalone life cover can provide support in the event of the policyholder's death or diagnosis of a terminal illness, it won't automatically cover a policyholder who becomes permanently disabled.
The impacts of suffering total disablement and not being able to work again can be devastating. The financial impact is also severe. If you're young, a large lum sum payout from TPD could support you for decades.
Some examples of illnesses or injuries that could fall under your TPD cover include:
TPD insurance could help you keep on top of your current debt, living expenses into the future and any rehabilitation and ongoing treatment that you might require, the costs of which can run into many thousands of dollars.
A number of life insurers do offer TPD as part of their life cover policies, but it's usually listed as an optional extra. This means you'd need to opt-in, by paying an added premium, in order to be covered.
It's important to review each Product Disclosure Statement (PDS) on any policy you compare before you lodge an application. Check whether a life cover benefit will be paid if there has already been a claim for TPD. In some instances, the benefit will not be paid or the policy will be cancelled.
To work around this, many policies will offer a 'buy-back' feature that reinstates the life cover that's been removed from the sum insured as the result of a TPD claim.
As an example, if you had $500,000 worth of life cover and $250,000 in TPD, if a claim is made the life cover sum insured would reduce to $250,000 in a linked policy. A buy-back feature will “top-up” this amount to $500,000 after 12 months of the claim being made.
The benefit of bundling the two cover types together is that it can be more cost-effective when it comes to paying premiums, and also makes the management of the two policies easier.
TPD policies generally come under two definitions. These are "own occupation" and "any occupation".
Own occupation: Benefit is payable if a certified doctor deems that it is unlikely for the policyholder to ever return to the occupation in their field.
Any occupation: Benefit payable if the policyholder is unable to perform the duties of their regular occupation and is unable to work in any other occupation that they may be suited to by education, training or further experience.
The distinction in the way your TPD cover is set up is an important one.
Financial adviser Brenton Tong told Finder that the type of TPD insurance that's sold within super funds, for example, was restricted to 'Any occupation'.
The chances of having a successful claim in this type of policy were "dramatically reduced", as opposed to direct policies that offer 'Own occupation' terms.
"It's important that if you want full coverage for a broader range of events, you need to take out a fully underwritten TPD policy. Any policy that does the underwriting at claim or a later stage is opening you up to having your claim denied,"
Find out if TPD insurance in super is right for you.
If you need to make a claim on your TPD insurance, follow these steps to ensure you have the best chance of making a successful claim.
Any occupation cover and own occupation cover are two types of cover that apply to Total and Permanent Disability Insurance (TPD) and Income Protection Insurance
What’s the difference between TPD and income protection insurance? We break down the key differences in this guide.
If you claim a TPD or a trauma benefit, does your life insurance sum remain at the same level?
Is TPD insurance tax-deductible? Do I need to pay tax if I receive a payout? Find out how TPD insurance is treated.