TPD Insurance Explained – The Basics
You may already know what a life insurance policy entails and may be looking for an explanation of total and disability insurance (TPD).
When you have a TPD policy, a lump sum payment is made to you in the event that an illness or injury renders you completely incapable of ever working again. TPD insurance is meant to cover you in case you are no longer able to earn a living, something that your life insurance would not cover if you are still alive.
Role of TPD
Losing the ability to work due to illness or injury usually brings with it increased costs for ongoing medical care. The total and permanent disability payout is meant to cover such expenses as well as paying off your debts and other household expenses. In many cases, the level of cover required in TPD is higher than that for life insurance because with life insurance, ongoing medical expenses would not be included. However, a TPD cover would exclude funeral expenses, which may be included in a life cover.
The total and permanent disability definition you choose for your policy will ultimately be used to determine whether or not you will receive TPD insurance benefits in case you become disabled. The own occupation disability definition is given as the inability to ever go back to work in your own occupation. This definition is generally preferred, but the premiums for such a policy may be costly, and certain occupations are excluded from this type of policy altogether. The any occupation disability definition is given as the inability to ever go back to work in any occupation for which you are reasonably qualified. Read more here to know more about TPD Insurance definition.
TPD coverage amount
The amount of TPD coverage you get is dependent on your individual needs. As such, it is important to find out how much money you would require to cover your expenses, debts and medical costs. If you have children, you would also need to factor in the amount that would be needed to pay for their education. You can use an online TPD insurance calculator to come up with an estimate coverage amount that would fit your circumstances.
Obtaining a policy
You have several options for obtaining your TPD insurance policy. You can get a standalone policy from an insurance company. You could also get your TPD cover through your employer in a superannuation fund or a group fund owned by your employer. Obtaining your TPD policy through your employer is probably the least expensive option. This is because the policy is purchased in bulk and lower rates may be negotiated. Read: How to handle/deal with loan sharks when they threaten me?
When choosing the type of policy that would be most appropriate and how to obtain it, it is important to think about your personal needs and those of your family. The ease with which you would be able to access your TPD benefits should also be given careful consideration. For instance, if you choose to get your TPD policy through superannuation, you would need to satisfy the disability definition provided by the insurer as well as the super. Speaking to a professional financial advisor is also recommended if you need TPD insurance explained further.