Total and Permanent Disability Insurance (2024)

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Total and permanent disability (TPD) insurance can be a valuable safety net for you and your family if an injury or illness renders you permanently disabled and unable to return to work. If you’re looking for cover in this area, however, finding the right policy for you often isn’t as simple as picking the first one you come across.

By comparing with Savvy, you’ll be able to consider competitive TPD insurance policies from a panel of trusted, industry-leading life insurers. Simply fill out a free, no-obligation quote and you’ll have a variety of available offers to consider side-by-side. Get the process started with Savvy today.

Total and permanent disability insurance, as the name suggests, is a type of life insurance which provides a lump sum payment if the life insured suffers an illness or injury which prevents them from ever returning to work again. This could be as a result of losing the use of your legs in a car accident or suffering a stroke.

Upon an approved claim, the policyholder will receive a lump sum benefit. There aren’t any restrictions on how you use those funds; you may choose to spend it on living expenses, like food and bills, or to pay off medical expenses. TPD cover is particularly useful if you need to make modifications to your home, like installing a ramp for wheelchair access or if you need to pay for a carer.

Each insurer defines disability differently, so it’s important to read your policy document carefully and compare them with Savvy. However, your TPD insurance will fall into one of two main categories:

• Any Occupation:applies if your disability prevents you from doing any type of work suited to your experience, education or training.
• Own Occupation:applies if your disability prevents you from working in your current occupation, but you may still be able to complete other work suited to your experience, education or training.

This means you may be able to claim for partial disability, provided you have an Own Occupation policy and prove to your insurer that you aren’t able to complete any work in your current position. If you have an Any Occupation policy, you may still be able to claim for partial disability, though it may be more difficult to receive a payout on the basis that your insurer may deem that your disability doesn’t rule you out from all types of work.

In terms of what isn’t covered, you won’t be able to claim for a disability which prevents you from working temporarily, rather than permanently. This may be a condition which requires a few months or years to recover from. Your family also won’t be able to claim in the event of your death, nor will you be covered if you receive a serious illness diagnosis which doesn’t permanently prevent you from working.

All coverage is subject to your insurer’s terms and conditions, so it’s important to check your PDS and with your insurer if you’re unsure of what can be covered under your policy.

The cost of your premiums will be based on a variety of individual factors and is largely determined by how different insurers assess your risk profile. The insurer will usually ask for the following information when you apply for a policy:

• Age: the older you are, the more expensive your premiums are likely to be.
• Profession: if you work in a profession with a higher risk of injury/illness causing permanent disability, you may have to pay higher premiums.
• Medical history: insurers will look at areas such as your weight, blood pressure and cholesterol, in addition to determining whether you have any pre-existing conditions which could put you at greater risk of disability. Those who are deemed at a higher risk of making a claim are likely to pay more for insurance.
• Family medical history: if you have a family history of certain inherited disorders, such as cancer, haemophilia and cystic fibrosis, you may have to pay more for your insurance (though this will depend on your insurer and the terms and conditions of your policy).
• Lifestyle: this includes factors such as whether you smoke or participate in higher-risk sports like rugby. Because these increase your chances of getting ill or injured, you may be charged a higher premium if these apply to you.
• Cover amount: the greater the payout you insure yourself for, the more you’re likely to pay in premiums.

Life insurance can be crucial in helping your family recover financially. If you’re unable to work, you’ll need to think about how you’ll cover your expenses. Do you have enough savings and assets to be comfortable? Will you have enough money to pay for medical bills, long-term therapy and modifications to your home? If your answer to either of these questions is no, you may need TPD insurance.

Here are just some of the ways TPD insurance can help you:

• Living expenses:if you can’t work anymore, or you can only work in a reduced capacity, you may need to rely on your TPD benefit to cover your daily expenses.
• Debts:do you have a mortgage, car loan or credit card debts which you need to pay off with your TPD benefit?
• Medical and rehab expenses:though Medicare covers most medical costs, it doesn’t cover everything, so you may need to draw on your TPD benefit to cover the gap.
• Modifications to home/vehicle:you may need to modify your home to suit your disability, such as installing ramps for wheelchair access.
• Professional assistance:you may need carers or cleaners to help you manage daily tasks which you can’t do yourself anymore.
• Future expenses:this could involve planning for retirement, supporting your dependents and providing for their future education expenses.

PROS

Lump sum benefit

If you’ve made a claim and it’s been approved by your insurer, you’ll receive your benefit as a one-off lump sum, potentially allowing you to pay for costly expenses such as modifications to your home or expensive equipment.

Cheaper premiums

TPD Insurance is generally cheaper than other types of insurance, such as income protection, though the cost will depend on your risk profile as determined by your insurer.

Tax-free benefits

You generally won’t need to pay tax on the amount you receive from your TPD policy, as these insurance payouts are typically tax-free.

Greater peace of mind for your family

If you become permanently disabled due to a covered injury or illness, you can rest assured you and your family can receive your policy’s payout to add greater financial support.

CONS

Temporary disabilities not covered

TPD insurance only covers you if you become permanently or completely incapacitated and won’t cover you if you sustain a temporary disability.In this case, income protection may be a more suitable policy to hold.

Not all pre-existing conditions will be covered

If your pre-existing condition is deemed a significant enough risk, it may be excluded from your coverage entirely (or available with additional loading).