TPD Insurance

What does TPD insurance cover?

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 TPD cover:

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 and only available outside super.

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.

Compare TPD insurance in Australian life insurance policies

You may already have TPD

According to ASIC, about 9 million Australians hold TPD insurance and more than 4 in 5 (86%) do so through their super fund.

How does TPD insurance work?

How much does TPD insurance cost?

The average cost of TPD insurance is $15.29 per month. However, the fee you pay will depend on factors such as your age, gender, occupation, lifestyle choices and health. If you're a "blue collar worker", your premiums are typically a little more than "white collar workers" because your job generally involves more risk. Similarly, women typically qualify for lower premiums because they live longer than men.

TPD insurance costs will also depend on how big a TPD benefit you need. For instance, someone looking for a $500,000 lump sum will pay a larger fee (premium) than someone with a $200,000 payout policy.

• White collar worker
• Blue collar worker

TPD insurance costs: White collar worker

$500,000 cover	Male	Female
Lowest costing policy	$21.42 per month	$21.19 per month
Medium costing policy	$26.89 per month	$26.89 per month
Highest costing policy	$29.12 per month	$29.12 per month
AVERAGE	$25.81 per month	$25.73 per month

$200,000 cover	Male	Female
Lowest costing policy	$10.16 per month	$10.03 per month
Medium costing policy	$16.86 per month	$16.84 per month
Highest costing policy	$18.85 per month	$18.85 per month
AVERAGE	$15.29 per month	$15.24 per month

TPD insurance costs: Blue collar worker

$500,000 cover	Male	Female
Lowest costing policy	$35.98 per month	$31.78 per month
Medium costing policy	$40.37 per month	$40.37 per month
Highest costing policy	$55.97 per month	$55.80 per month
AVERAGE	$44.11 per month	$42.65 per month

$200,000 cover	Male	Female
Lowest costing policy	$16.26 per month	$15.04 per month
Medium costing policy	$23.68 per month	$23.68 per month
Highest costing policy	$30.64 per month	$30.34 per month
AVERAGE	$23.53 per month	$23.02 per month

Average prices were taken from a sample quote of all policies available on Finder's quoting engine. Details of the quote were for a 35-year-old non-smoker.

• Factors that affect the cost of cover

  • Age. This is one of the most important factors to affect your premium. TPD insurance premiums are generally stepped, which means as you get older, your premium gets more expensive each year.
  • Gender. Women typically qualify for lower premiums because they live longer than men.
  • Occupation. Your job affects how much you'll pay for cover. The more dangerous the job the more you'll pay for TPD cover.
  • Family medical history. Insurers take into account a range of personal situations including your family's medical history.
  • Current health indicators. Your premiums can be affected by a range of health indicators including your blood pressure, cholesterol and red blood cells.
  • Lifestyle choices. If you smoke, drink or participate in high-risk activities on a regular basis, these factors are also taken into account when calculating your level of risk to the insurer.

What are the benefits of TPD insurance?

Some TPD insurance benefits and features you should be aware of include:

• 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.

Is TPD insurance included in my super fund?

Yes, it often is. However, it's not available with every super fund so it depends on which one your employer offers. If you want to check the level of cover provided by your super fund, you can look at your member statement or contact your super fund directly.

Pros and cons of TPD insurance inside super

TPD cover is sometimes included in the superannuation you receive from your employer. However, there are a few pros and cons of getting TPD insurance inside super.

Pros

• It's often cheaper.
• Premiums are tax-deductible up, to a limit.
• Automatically deducted premiums so you can "set and forget".
• Premiums can be funded from your super balance, therefore not impacting your cashflow (budget).

Cons

• The premium costs eats into your retirement savings.
• There's a tougher, and often more drawn out, approval process for claims.
• You can't get "own occupation" cover, which can restrict your ability to be eligible to make a claim.

Life insurance glossary: Key terms to know

A rundown of the tricky definitions for life insurance. Plus, what to look for when you're comparing.

Or speak to a broker to help you find tailored cover

Frequently asked questions about TPD insurance

• How much TPD insurance do I need?

  When determining how much TPD insurance you may need, a very rough rule of thumb is to take out coverage that is 10 times your annual salary. Some things you should consider include:

  • Your debts. If you have a mortgage, loan or any debt, you need to factor that into the amount of TPD cover you need.
  • Your level of health insurance. If your health insurance won't cover all the medical bills should you become permanently disabled, factor the costs into your TPD coverage.
  • Your super fund. If you have TPD insurance inside super, you might be able to receive a payout through your super as well.
  • Family assistance. If you or your partner become disabled, who will take care of the home duties? You might need to consider budgeting for family assistance.
  • The level of coverage you want. Are you willing to sell your home or other assets and move somewhere cheaper? If not, then you want enough coverage to pay for all your debt repayments.

  However, everyone is different so you should consider your own circumstances and seek advice on the appropriate level of cover for you. A financial adviser could support your decision making if required.

• Can you add TPD insurance to my life insurance policy?

  Yes, you can add TPD cover onto your existing life insurance policy to have a more comprehensive coverage.

  If you're comparing a new deal, be sure to check and see if the TPD cover is offered as a standalone product or an add on.

• Should I bundle TPD insurance with life insurance?

  Figuring out whether you want TPD on its own or bundled with life insurance essentially boils down to the risk you're willing to take, based on your personal circumstances. It can make cover cheaper, and if you're sure to calculate your living expenses, it can still leave your loved ones with more than enough to pay off debts, home loans and other everyday living costs.

• 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.

  Read more about TPD insurance claims in our comprehensive guide.

• Can a self managed super fund (SMSF) own a TPD insurance policy?

  Taking out insurance through a superannuation fund is a common option and if you have set up your own SMSF then your fund can own your TPD policy.

  In the event of a claim, the benefit is paid to your SMSF and you must meet the guidelines for a superannuation TPD policy to allow you to withdraw the benefit payment before your retirement. These payments may also incur a tax liability.

• 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.

• Can you apply for TPD if you are not working?

  If you're no longer actively employed or are doing work that's unpaid but still your full-time activity, you may be eligible for 1 of the following types of TPD insurance:

  • Home Duties. This policy type is designed specifically for homemakers and offers cover for people for whom domestic duties are generally their full-time activity. Even if homemakers do not earn a salary, they still perform a host of vital duties in and around the home and to assist the rest of the family. Under a Home Duties definition, if you're no longer able to perform your regular domestic work you may receive a benefit. This type of cover can help with things such as home maintenance, childcare and the cleaning and cooking.
  • Non-working TPD. This option is generally not available when you first take out TPD cover but then becomes available when you reach a certain age. However, most working TPD policies will convert to this definition on your 65th or 70th birthday. Under this definition, you will be eligible to receive a partial benefit if you lose your ability to perform a specified number of daily living tasks or suffer other specific injuries, covered below.
  • Modified TPD. This is a "working" TPD policy where you add on features of a "non-working" policy. These may let you claim on disabilities outside the normal scope of TPD policies when you are still working age.

• Does TPD insurance cover loss of hearing?

  This is a little more tricky. In order to trigger a payout, TPD policies require the policy owner meets the criteria of total and permanent disablement as a result of their illness or injury.

  Meeting the criteria

  Depending on what's decided on when you apply:

  • You will need to be unable to work for a consecutive number of months in your own occupation (easier to prove).
  • Or unable to work for a consecutive number of months in any occupation (harder to prove).
  • Ongoing care is also required.

  The person claiming will need to seek the ongoing care of a medical professional. The insurer must also deem that the severity of the sickness or illness means that the insured is unlikely to ever work in regular remunerative work for which they are fitted either by education, training or experience. For an increased premium, applicants can elect to take out cover that will provide a benefit if they are unable to return to their own occupation.

• What is a duty of disclosure? Do I have to do this?

  When looking for TPD cover, you have to disclose any relevant information requested by the insurance provider to allow them to assess your situation. This is legally binding and you must disclose any relevant, known information to avoid the legal consequences of not informing the underwriter about information that may affect the policy.

• What illnesses or injuries are excluded from being covered on a TPD policy?

  In most cases only intentional, self-inflicted injuries will be excluded from receiving a successful claim payment.

• Is a TPD benefit paid from the benefit of a linked life insurance policy?

  When your policies are linked and you make a successful claim on your TPD policy, the benefit you receive will be deducted from your life insurance amount. If you don't want your life insurance to be affected by a TPD claim, you can choose a double TPD policy, a TPD buyback benefit or a standalone TPD policy.

• Does TPD insurance cover you when you're overseas?

  You can find TPD policies which will cover you for illnesses or injury you incur while you're travelling overseas or living overseas for an extended period of time. Just make sure you check the conditions of your particular policy with your insurer.

• Who is eligible for the National Disability Insurance Scheme (NDIS)?

  In order to qualify for the NDIS, you need to be a resident, permanently disabled and under 65. While the scheme is a great option if something bad happens, it often doesn't cover all your needs and expenses, which is where TPD insurance comes in.

• What's the difference between TPD insurance and income protection?

  While income protection insurance provides you with a sustained income if you're unable to work due to illness or injury, TPD insurance comes in the form of a lump sum payment, helping you take care of any debts and living expenses, as well as any immediate medical bills.

  Trauma insurance, on the other hand, pays for critical illnesses and incidents on specifically listed medical conditions.

Karen Eley is the founder of Women Talking Finance, which provides money coaching and financial literacy and education services. An experienced and former financial adviser who has worked in financial services industry for 22 years, Karen is a Certified Money Coach (CMC), holds a Bachelor of Accounting and an Advanced Diploma in Financial Planning and CFP.