Total Permanent Disablement (TPD) Insurance
What is Total Permanent Disability Insurance?
Total and Permanent Disability Insurance (TPD) is normally an optional extra cover on a life or trauma insurance policy and commonly covers against you being permanently unable to work in your chosen occupation. The amount of disability required varies – for example a surgeon might be considered totally disabled through the loss of one hand. The amount of cover you can buy is normally limited to the amount of the life or trauma cover purchased.
Total Permanent Disability Insurance is closely related to income protection insurance, whilst both these policies pay out in the event of you being unable to do your own job, TPD is harder to claim on and only pays out a lump sum, whereas income protection is produces an income to a specified retirement date on the basis of you being unable to do your own job during the period of claim (ie not permanently). For this reason, TPD should be considered an additional bolt on policy rather than a replacement for income protection.
Since an income protection policy is easier to claim on than TPD, can potentially payout until your specified retirement date and benefit payments can increase in line with inflation, an insurer’s liability can be huge and premiums can reflect this.
Total Permanent Disability Insurance is harder to claim on since they are assessing whether you are permanently unable to do your own job and the payout is limited to the insured amount, but is reflected in a relatively low cost of providing this benefit.
What different types of TPD are there?
Own Occupation definition – A payout occurs if by reason of illness, accident or injury you are permanently unable to perform your normal occupation.
Own or Suited Occupation definition – A payout occurs if by reason of illness, accident or injury you are permanently unable to perform your normal occupation and/or an occupation suitable to your training and experience.
Any Occupation definition – A payout occurs if by reason of illness, accident or injury you are permanently unable to perform any work at all.