What is Total and Permanent Disability Insurance Cover?
Total and Permanent Disability (TPD) Insurance pays a benefit if the Insured Person becomes totally and permanently disabled. It may assist with medical and rehabilitation/ongoing care costs, and provide a level of financial security for your family.
Benefits of TPD Insurance Cover:
The lump sum payment can help you to:
Reduce or clear your home loan and other debts.
Cover medical and rehabilitation expenses.
Meet your future living expenses.
Provide for paid carers.
Pay for modifications to your home or vehicle.
Cover education costs for your children or grandchildren.
Protect your long-term wealth accumulation strategy.
It protects your family from having to exhaust their savings, sell assets or rely on Centrelink for assistance.
How is TPD Insurance Cover assessed when you need to make a claim?
Generally speaking, a range of professional medical advisers are used to determine your claim for TPD Insurance. The type of policy and the insurer you have chosen can affect how successful your claim will be. This is why it is extremely important to have your financial adviser help you select your TPD Insurance, to ensure you have covered appropriately and have the best chance to be able to make a claim.
To receive a TPD payment, you must meet the definition that is specified in the insurance policy. Some policies require that you are unable to work in an any occupational capacity and some require that you are unable to work in your own occupation capacity.
‘Any Occupation’ VS ‘Own Occupation’ Definitions:
Any Occupation is defined as you are unlikely to return to work at your usual or any occupation which you are reasonably suited to by way of training, education or experience. Own Occupation is defined as you are unlikely to return to work in your own specific occupation.
TPD cover under ‘any occupation’ is less expensive than cover under an ‘own occupational’ policy. It is important to understand that this could prove more difficult to claim on, as the insurer may take into account other training and experience you may have when determining the extent of your disability.
The ‘any occupation’ cover works best if you hold the cover within your superannuation fund, have only ever worked in the one occupation or want the least expensive option. The ‘own occupational’ cover works best if you can afford the higher premium, want a more flexible cover or have had a varied occupation history. ‘Own occupation’ cover is unable to be held within a superannuation environment.
These definitions are a very important consideration when choosing your TPD Insurance and are key in determining whether you qualify for a lump sum payout in the event of total and permanent disablement.
How can I pay for my TPD Insurance Cover?
Most Australians with a superannuation fund may be able to utilise their superannuation funds to pay for their TPD Insurance policy. Otherwise, TPD Insurance can be paid out of pocket monthly or annually depending on the preferred payment methods defined by your insurance provider. GI Advisers can help you determine the most appropriate approach for your personal circumstances.
Stepped and Level Premiums
Stepped premiums are initially cheaper however will increase each year – normally on your birthday, or on the policy anniversary date. Stepped premiums are beneficial to insurance policies intended to be held short-term. The amount the policy initially increases often goes unnoticed by policy holders, however once policy holders reach a certain age, the amount they pay for their insurance can rapidly increase. By the time you notice this drastic increase, it may be too late – leaving you with an insurance policy that is unsustainable and unaffordable – when you need it the most.
Level premiums allow you to lock-in your premium, sometimes right through to retirement age. Level premiums are beneficial for insurance policies intended to be held long-term. This type of premium initially will be more expensive than stepped premium but can often result in greater savings over the long term. Most importantly, level premiums can ensure that your insurance cover remains affordable and sustainable when you need cover the most.
GI Advisers helps Australian’s get the best possible Total and Permanent Disability (TPD) Insurance Cover, and can advise whether these enhanced definitions are available to you. The appropriate level of TPD Insurance is different for every individual. To get an approximate idea of the appropriate level of TPD cover required, you can get a quote or contact us at our Brisbane head office.