What is Total and Permanent Disability Insurance and why should I care?

What is Total and Permanent Disability Insurance and why should I care?Life is unpredictable and because of this, there is no way we can be sure of the future. The truth is, you don’t know if you will fall ill or have an accident that could prevent you from working again. None of us have that certainty, which is why having Total and Permanent Disability (TPD) Insurance is worth considering.

What is TPD insurance?

Simply put, TPD insurance provides you with protection against any accident and illness that may leave you disabled and/or unable to work again. In essence, it is an insurance scheme that protects you against misfortunes that would affect your earning potential in the future.

In the event of an accident or illness, TPD insurance will replace your income so that you can continue to pay your mortgage, put food on the table and meet all other lifestyle expenses. In addition to this, it will also provide for lifestyle adjustments such as wheelchairs, ramps, etc.

The money is paid in a lump-sum after it has been decided that you satisfy your insurer’s criteria.

How does it work?

The lump-sum benefit is payable when you become totally and permanently disabled. Although each insurer defines a permanent disability differently, it does generally cover loss of limbs, sight, and illness or injury that results in you not being able to work properly again.

Broadly, there are two types of TPD insurance.

  • Own Occupation: Under this definition, your lump-sum benefit is paid if you become permanently disabled and are unable to perform your duties in your place of employment for six months. You also qualify for this benefit if you are unable to return to your full-time employment again.
  • Any Occupation: This definition is broader than the Own Occupation definition as it accounts for all occupations to which the injured or permanently disabled may be suited to through education, training and experience.

For example, say you currently work as a structural engineer and you lose the use of your leg. Under the Own Occupation definition, you would be considered permanently disabled as you will not be able to continue your work in the same way. In this respect, the benefit would be payable. However, under the Any Occupation definition, it could be argued that despite your disability, you could still use your engineering knowledge to work as a consultant or project adviser.

How much is enough?

The answer to this question depends entirely on your personal needs and circumstances. The amount of cover needed can vary drastically and of course, a lot will depend on the risks associated with your occupation (a builder would be considered higher risk than an office worker).

When thinking about the amount of cover you require, ask yourself the following:

  • What are my current monthly expenses?
  • Do I have any debt, and if so, how much?
  • How old am I and am I prone to illness?
  • How much risk is associated with my job?
  • How many dependents do I have and what are their needs?

I have Income Protection Insurance, why do I need TPD insurance too?

This is a good question and one that is regularly raised. Although TPD insurance is similar to income protection insurance, there are two slight differences:

  1. TPD insurance provides cover for long-term disability while income protection insurance provides cover for both short and long-term disabilities.
  2. TPD comes in the form of a lump-sum payment while income protection insurance provides a monthly benefit that acts as a replacement income for a specified period.

TPD insurance is relevant to everyone, whether you have a family or not. If you have a family, TPD insurance will help minimise the impact that a serious illness or disability will have on your life. If you are single, TPD insurance will help you look after yourself and will provide for any and all medical needs that may arise.

The information in this article does not constitute legal or financial advice. If you would like to discuss any of the above in greater detail, please contact your local Axis adviser. 

Image Credit: kenteegardin CC

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