Total & Permanent Disability Insurance - It’s a matter of definition
Total and permanent disability (TPD) insurance
TPD insurance is commonly taken as an optional extra with term life cover, or it can also be obtained on a stand-alone basis. TPD cover provides a lump sum payment in the event of total and permanent disablement. To make a claim you generally need at least two medical practitioners to certify that you are unlikely to be able to ever work again.
“Own” vs “any” occupation
It is important that you select the cover that contains the most relevant definition of TPD for your circumstances. There are two main definitions that exist for Australian TPD insurance policies: “own” and “any” occupation.
“Own occupation” means that the TPD payment is made when you are unable to perform your own occupation.
“Any occupation” means that you can claim if you are unable to perform any occupation that you are reasonably suited to by way of education, training, or experience.
Selecting the right definition
Selecting the right definition for your needs is crucial. If you are a high income earner in a specialist occupation, especially one that has required many years of training, it’s important to consider a TPD policy with an “own occupation” definition.
Take the example of Wally, a neurosurgeon who spent over 15 years training to achieve his professional qualifications. He is a senior team member in a specialist medical consulting practice and earns an annual income in the high six figures.
If he were being assessed under a TPD claim and the insurer decided that he was unable to perform the usual duties of his role with an “own occupation” definition, he would receive his payout (assuming all other claims criteria was satisfied).
If Wally had an “any occupation” definition, securing a TPD payout may be much more difficult given his high degree of experience and training. This hurdle arises because even though Wally may be too ill to work as a specialist neurosurgeon, he may be deemed well enough to obtain alternative employment that uses his skill set, perhaps as a sales representative with a pharmaceutical company or even as a university tutor, on a much lower remuneration level than he is used to.
Seek professional advice
With so many different TPD products available in the marketplace, seeking advice from a financial planner is crucial to ensure you have the right cover for your needs, and that you aren’t paying the earth for it.
Please contact us if you’d like to know more about TPD insurance.
