TPD Insurance is Total and Permanent Disability insurance
Total and permanent disability (TPD) insurance is one of the life insurance policies available to provide personal financial protection against –
- loss arising from an illness or injury, that
- prevents the insured from returning to their previous type of work.
These insurance policies play a crucial role in wealth protection strategies, providing asset protection when needed most. (A useful feature of this type of policy from some providers include ‘temporary significant incapacity’ as a policy condition.)
TPD insurance is available as –
TPD insurance means the total and permanent disability of the insured under the definition in the relevant policy.
Special provisions apply when an insured is unable to work because of loss of a limb or thier sight, and is unable to conduct basic daily living activities. In these claims, a lump sum is payable.
Understand the cover defined in your TPD insurance policy
There are two definitions of being unable to return to work within TPD insurance:
- The first is where the insured’s incapacitated permanently prevents them recommence work in any occupation suited to them. Under this definition their ‘ability’ is measured against their former education, training, and experience. It assumes the ability to work after a period of retraining within that criteria framework. (This is the ‘any occupation‘ definition.)
- The second is where the insured’s inability to work prevails beyond six months. Their incapacity is such that they will never be able to work again in their own occupation. (This is the ‘own occupation‘ definition.)
Premiums for this type of insurance are somewhat more expensive than for ‘any occupation’ insurance.
We have seen that some group insurance policies, particularly Industry Super Funds, have further watered down the ‘any occupation’ definition. This definition includes the inability to be further educated or trained to enter into gainful employment. This makes it more difficult to be eligible to make a successful claim under these policies. The justification for this is to keep the premiums lower.
Who can apply for a TPD insurance policy?
TPD insurance cover is generally available to people aged between 16 and 60. Beyond that, existing policies are renewable up to age 65. The insured benefit will be payable provided the person suffers total and permanent disablement before age 65. The level of the benefit usually tapers downwards from age 61.
Generally, the cover will cease when the insured has not been working full time for at least six months –
- except as a result of TPD, or
- upon them turning 65.
Some insurers provide for cover can be maintained beyond age 65. In those instances, an ‘activities of daily living’ definition prevails. This is a restricted category for claims entitlement availabilty.
TPD insurance cover associated with a term life policy, may –
- reduce the term life benefit amount by the amount of a TPD benefit paid
- if a successful claim results from incurring a total and permanent disability.
Some life policies provide an option for buyback of that level of death cover.
TPD Insurance in superannuation funds
A superannuation fund account can hold TPD insurance policy protection for the account owner. The TPD cover is able to link to a term life policy within the fund. Premiums funded through a superannuation account may receive concessional tax treatment. A payment of a TPD benefit from super will have tax consequences which may reduce the TPD benefit received.
Special rules apply to insurance held within superannuation, particularly in respect of the occupation definition that can apply to TPD – and to Salary Continuance; and advice should be sought, especially when insuring through a SMSF. Membership of any publicly offered superannuation fund, or through self managed superannuation funds (an SMSF), is eleigible to hold this insurance.
At Continuum Financial Planners, TPD Insurance is an integral part of the financial planning strategies we recommend for our clients. On acceptance and implementation, we offer annual reviews, ensuring that –
- the intention to be able to continue to make debt repayments,
- provide for children’s education,
- continue wealth accumulation for retirement planning, and
- provision for dependants to be financially secure,
is preserved over time and with changing circumstances.
To make an appointment to discuss your insurance needs with one of our experienced financial planners –
- phone our office on 07 3421 3456, or
- at your convenience, use the linked Book A Meeting facility.
(This article was originally posted by us in March 2010. We occasionally refresh/ update it, most recently in June 2025.)
