Total And Permanent Disability Insurance (TPD)
Total and Permanent Disability Insurance (TPD) is an additional cover to death cover and is designed to provide a lump sum should you suffer an illness or injury which totally and permanently incapacitates you, preventing you from working again.
TPD can be taken out to repay debts, to cover capital gains tax liabilities and to cover dependants for the loss of an income provider.
Before purchasing a TPD contract, you should establish the circumstances under which the insurance company will pay a claim, as the precise definition of TPD and the conditions that must be met to receive compensation vary considerably with different companies.
It is generally paid when you have been advised by a medical specialist that you will never work again.
‘Own’ Versus ‘Any’ Occupation Definition
TPD definitions vary between companies, but the differences between ‘Own’ and ‘Any’ occupation TPD cover can be broadly described as follows:
Own Occupation – You will be paid if by reason of accident or injury you are unable to work ever again in your own or normal occupation.
Any Occupation – You will be paid if by reason of accident or injury you are unable to work ever again in any occupation for which you are reasonably suited by education, training or experience.
Which Is Better?
‘Own’ occupation definitions are generally preferable to ‘Any’ as there is a greater chance of payment.
For example, an injury such as the loss of one hand may disable a surgeon under this definition, but under an ‘Any’ occupation definition this may leave him able to perform the duties of a GP and therefore not qualify for the benefit.
However the ‘Own’ occupation definition is more expensive and may not be available for all occupations. Some companies offer other ‘Home duties’ and ‘modified’ definitions of TPD.
Previously only one TPD benefit was ever payable and after a payout it was very difficult to obtain death, TPD, Trauma or Income Protection cover from any insurer.
Some insurers now offer a buyback option which allows you to repurchase the death cover component after making a claim.