Total and permanent disability (TPD) insurance is a rather niche form of insurance which provides a financial safety net for those who may suffer from a permanent injury or illness. TPD insurance helps to support individuals with disabilities by covering for medical and rehabilitation costs in a lump sum.
While relatively simple, there are a number of things you should know about TPD insurance before deciding to purchase it for your benefit. In this blog, we’ll detail everything you need to know about TPD insurance to help you make a better informed decision.
What does TPD insurance over?
Depending on the type of TPD insurance and the insurance provider (either an insurer or a super fund), TPD insurance covers a few different situations:
- If you sustain a permanent injury or illness which prevents you from working in any occupation (which you have received education, training or experience in). This insurance is often on the cheaper side, however has a higher threshold to claim, hence also less likely to be claimed.
- If you sustain a permanent injury or illness which prevents you from working in your own occupation. This insurance is often more expensive than the one above as and is only available from insurance companies.
Different insurance agencies and super funds may have varying definitions for what they classify as ‘total and permanent disability’, meaning it is important to read the insurance’s product disclosure statement (PDS) carefully before purchasing. You may also find it worthwhile to contact the insurance company and ask questions about their policy yourself.
What to consider before purchasing TPD insurance
TPD insurance is not for everyone. If you already hold insurances such as private health insurance and trauma or income protection, you may not benefit from the financial support TPD insurance provides, in the case that you do experience a permanent injury or illness.
Similarly, you should also factor in your existing savings before purchasing TPD insurance. Do you have the money needed to support you and your family? Repay debts such as mortgages and credit cards comfortably? Can afford medical and rehabilitation costs? If you already have adequate savings (excluding your retirement funds), you may not need to purchase TPD insurance. However, if you don’t TPD insurance may provide you with peace of mind and a financial safety net.
Where can you purchase TPD insurance?
Before purchasing TPD insurance, first make sure that you don’t already hold one through your super fund. Most super funds offer a default TPD cover which is less expensive than buying it separately. Instead of buying an entirely new cover from an insurance agency, you can add on features to your existing one off your super.
TPD insurance is also sold by financial advisors and insurance brokers. They can be sold separately, or in a package with other insurances such as life cover. Make sure to consider all your options first before purchasing TPD insurance, and whether or not you need to purchase such cover in the first place. You can also consult with a financial advisor before making such an important decision.