Do you have the right TPD cover? Advances in medical science mean your chance of survival after an accident or serious illness is much better than it was even 20 short years ago. But what will your quality of life be like if you can no longer earn an income? You will need money to pay off debts, support your family, pay medical bills, and support your lifestyle.
Most life insurance policies will allow you to buy extra cover for just this event. It’s called a Total and Permanent Disablement (TPD) benefit. It’s usually offered to working people aged between 16 and 65, with policies also available for homemakers. Cover can be arranged privately or through a superannuation fund or a mixture of both. The benefit is paid as a lump sum.
Like all insurance policies, it’s important to understand when the benefit will be payable. This is particularly important with TPD cover where the insurer will generally pay out in the event that it is unlikely you will ever be able to work again. But what does that mean?
To qualify for payment you will generally need to have been off work for at least six months due to the disability. You will be required to lodge medical reports from your own doctors and be examined by the insurer’s medical specialists. Depending on the wording of the policy, the insurer will decide if you can work again in:
• Your Own occupation
• Your Own or a similar occupation
• Any occupation, or
• Conduct Home Duties.
Some policies provide other definitions of disablement such as; loss of limbs, blindness or inability to perform the activities of daily living. Activities of Daily Living (ADL) is often seen in automatic accepted cover, such as cover offered through your employer’s group Superannuation policy. This definition can be difficult to meet requiring a far greater severity of Total and Permanent Disability as compared to the conditions that would satisfy an Own, Any or Home Duties definition.
Since 1 July 2013 any lump sum payments paid from a TPD policy held within a super fund cannot be made to the beneficiary unless and until that person satisfies a condition of release as defined in the legislation. This all but rules out holding “own occupation” TPD policies within super. As a result of this legislative change, there are differences between the Any Occupation definition of cover held through Superannuation as compared to the Any Occupation definition on cover held outside of Superannuation.
There is a natural tendency to look for the lowest premium in selecting insurance. With TPD cover, being sure the policy definitions are appropriate for your own circumstances is absolutely vital. After all, there is no point having a policy that doesn’t pay out when you need it.
If you wish to discuss your TPD policy please contact our expert risk insurance staff here at Leenane Templeton.
Call (02) 4926 2300 or email us.
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