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Total and permanent disability (TPD) insurance

Total and permanent disability (TPD) insurance can help cover the costs of loan repayments, bills & rehabilitation.

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Total and permanent disability (TPD) insurance protects you if you become permanently disabled and can no longer work.

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 debt you have as well as any immediate medical expenses.

How does TPD insurance work?

You pay your insurer a monthly or annual fee and in return, receive one large payment from it if you become permanently disabled and are unable to work. There are two main types of TPD insurance:

  1. Any occupation: You can no longer work in any jobs suited to your education, training or experience.
  2. Own occupation: You can no longer work in your current job.

If you take out “any occupation” TPD cover, you get a payout if you can no longer return to any form of work related to your experience. “Own occupation” TPD insurance pays a lump sum if you can no longer return to your usual occupation.

Factors that affect the cost of cover

TPD insurance benefits

Some TPD insurance benefits and features you should be aware of and might want to 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 e.g. loss of one arm, one leg or sight in one 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.
  • 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.

TPD insurance tips

When taking out TPD insurance and calculating the cover you need, you should consider:

  • 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 small 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 and move somewhere cheaper? If not, then you want enough coverage to pay for all your debt repayments.

TPD insurance tips

When taking out TPD insurance and calculating the cover you need, you should consider:

  • 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 small 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 and move somewhere cheaper? If not, then you want enough coverage to pay for all your debt repayments.

Frequently asked questions

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