Personal Insurance – What is Total and Permanent Disability Insurance
Total and Permanent Disability (TPD) insurance Is a lump-sum payment that is paid out in the event that you are totally and permanently disabled.
Who should get TPD insurance?
TPD should be a consideration when reviewing your overall financial situation and your insurance requirements.
TPD insurance may be required to clear debts, ensure you have appropriate one-off and/or ongoing medical care, and pay modifications to your home (if required) in the event you become totally and permanently disabled.
The amount of cover you require will be determined by your personal preferences, situation and type of occupation so it is crucial to discuss this with your adviser to determine if and how much cover is appropriate for you.
Insurance policy premiums are determined by your occupation type. Two important things to consider when choosing a level of cover are:
1. If you feel that the chance of TPD in your occupation is likely and therefore this type of insurance is necessary.
2. If you feel that there is a low chance of you TPD in your occupation, however in the event that you were totally and permanently disabled the impact on you and your family would be severe and therefore this cover would be invaluable.
What is the difference between ‘any’ and ‘own’ occupation TPD?
‘Any’ occupation insures you where you are totally and permanently disabled and unable to work in any occupation you are suited to based on education, training or experience. This definition may be more difficult to satisfy in the claims process and you may be expected to return to work in a different role, industry and/or capacity.
‘Own’ occupation insures you where you are totally and permanently disabled and unable to work in your usual occupation or industry. This definition may be easier to satisfy during the claims process.
How do you get and pay for TPD insurance?
You can obtain TPD insurance directly with an insurance company or superannuation fund, meaning the premiums may be either debited from your bank account or deducted from your superannuation account balance.
How you choose to pay your life insurance premiums can impact on other financial factors such as your disposable income and/or the balance of your retirement savings.
The tax payable on the benefit amount (in the event of a claim) will also differ depending on if you pay for your premiums from your bank account or if they are deducted from your superannuation balance.
Our team of Financial Planning specialists are here to help
TPD insurance can be very complex! There are numerous ways to structure the required cover, and it is important to keep in mind that your occupation will determine premium rates and the type of cover (any or own) will dictate the features of your policy.
To ensure you are equipped with everything you need to make an informed decision, get in touch with the Rethink Financial Planning team for our personalised financial advice. Our Newcastle financial advisers will work through the pros and cons of whether or not this is the right strategy for you.
Contact us on 4962 4440 or you can fill out our Pre-appointment Questionnaire here and one of the team will be in touch.
Any information provided on this website is general advice only and does not take account of investors’ objectives, financial situation or needs. Before acting on this general advice, investors should therefore consider the appropriateness of the advice having regard to their objectives, financial situation or needs.