Considerations For Getting Maximum TPD Insurance Benefits
TPD benefits under a TPD insurance policy are meant to provide cover in case sickness or injury results in you becoming totally and permanently disabled.
When you purchase such a cover, you select the amount that will be paid to you if you become permanently disabled and unable to ever work again.
This amount is known as the sum insured. In order for a TPD claim to be successful, you much meet the TPD definition included in your policy so your insurer pays out the sum insured. However, there are certain considerations you should make concerning your benefits before you buy a policy.
You can only make a successful Total and Permanent Disability Insurance claim if you satisfy the total permanent disability definition provided in your policy. There are two main types of TPD insurance policies: own occupation and any occupation. The difference between these two types of policies is their definition for total permanent disability. An own occupation policy defines TPD as the inability to ever work again in your own occupation while any occupation policies define TPD as the inability to ever work again in any occupation.
If you are holding your policy in a super fund, making a successful claim could get even more complicated. This is because you must satisfy the TPD definition provided in the policy as well as the permanent incapacity definition that applies in the super fund. In most cases, both definitions will agree if your policy includes the any occupation TPD definition. However, you may not be able to access your benefits if you have an own occupation or home duties policy. As such, it is important to carefully consider whether such policies should be held within a super fund at all.
Taxes on benefits
TPD benefits for a policy held in super would also be taxable, but there is a tax-free portion based on the period the member could have been expected to be gainfully employed or the remaining period leading up to the date of retirement had the person not become disabled. The tax-free portion generally reduces as you grow older and is largest when you are young. As such, depending on how old you are, you should also consider whether it would be better to obtain your policy through super or outside super. If you obtain your insurance policy directly from an insurance company, this would mean that you would own the policy. In such a case, you would receive your benefits insurance tax-free.
In most cases, a waiting period is applied after you become disabled before your insurance benefits can be paid out, more information here. This means that you would have to be off work for at least three to six months. The exact period will be provided in your policy. It is also worth noting that TPD insurance does not provide coverage for disablement resulting from intentional, self-inflicted harm. In addition, if you have a linked TPD life insurance policy, the TPD benefit would be deducted from the amount you have in life insurance. When considering the benefits of your insurance policy, you need to speak to your financial advisor before deciding on the best approach for obtaining insurance coverage.