Total and permanent disability (TPD) insurance

Total and permanent disability (TPD) insurance protects you if you become permanently disabled and can no longer work.

While income protection insurance provides you with a sustained income if you're unable to work due to illness or injury, TPD insurance comes in the form of a lump sum payment, helping you take care of any debt you have as well as any immediate medical expenses.

Compare optional TPD cover on Australian life insurance policies

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Name	Product	Maximum cover	Maximum Entry Age	Expiry Age	Optional Cover - TPD	Optional Cover - Trauma
NobleOak Term Life Insurance		$15,000,000	69	99	Yes	Yes	Get quoteMore info	Compare	loading Fetching your data...
Real Family Life Cover		$1,000,000	64	No expiry age as long as premiums are paid	Yes	No	Get quoteMore info	Compare	loading Fetching your data...
Guardian Life Insurance		$1,500,000	64	No expiry age as long as premiums are paid	Yes	Yes	Get quoteMore info	Compare	loading Fetching your data...

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How does TPD insurance work?

You pay your insurer a monthly or annual fee and in return, receive one large payment from it if you become permanently disabled and are unable to work. There are two main types of TPD insurance:

1. Any occupation: You can no longer work in any jobs suited to your education, training or experience.
2. Own occupation: You can no longer work in your current job.

If you take out "any occupation" TPD cover, you get a payout if you can no longer return to any form of work related to your experience. "Own occupation" TPD insurance pays a lump sum if you can no longer return to your usual occupation.

Speak to an advisor about TPD insurance

Here's when TPD insurance is needed and how it is used:

1. A situation forces you to stop working.
Common examples include loss of sight or hearing and mental illness.

2. Your insurer assesses your claim.
It'll look at your injury or illness and confirm that you can't return to work.

3. Receive your benefit payment.
In addiction to your income, payment can help towards debt and medical expenses.

How much does TPD insurance cost?

The average cost of TPD insurance is $15.29* per month. However, the fee you pay will depend on factors such as your age, gender, occupation, lifestyle choices and health. If you're a "blue collar worker", your premiums are typically a little more than "white collar workers" because your job generally involves more risk. Similarly, women typically qualify for lower premiums because they live longer than men.

TPD insurance costs will also depend on how big a TPD benefit you need. For instance, someone looking for a $500,000 lump sum will pay a larger fee (premium) than someone with a $200,000 payout agreement.

• White collar workers
• Blue collar workers

Average prices were taken from a sample quote of all policies available on finder.com.au's quoting engine. Details of the quote were for a 35-year-old non-smoker.

Factors that affect the cost of cover

• Age

  This is one of the most important factors to affect your premiums. TPD insurance premiums are generally stepped, which means as you get older, your premiums get more expensive each year.

• Gender

  Women typically qualify for lower premiums because they live longer than men.

• Occupation

  Your job affects how much you'll pay for cover. The more dangerous the job the more you'll pay for TPD cover.

• Family medical history

  Insurers take into account a range of personal situations including your family's medical history.

• Current health indicators

  Your premiums can be affected by a range of health indicators including your blood pressure, cholesterol and red blood cells.

• Lifestyle choices

  If you smoke, drink or participate in high-risk activities on a regular basis, these factors are also taken into account when calculating your level of risk.

*Average prices were taken from a sample quote of all policies available on finder.com.au's quoting engine. Details of the quote were for a 35-year-old non-smoker.

Who offers TPD insurance in Australia?

In Australia you can either get TPD insurance directly with an insurer or with the help of an adviser (retail insurers). We've compared TPD insurers based on market share.

TPD insurance benefits

Some TPD insurance benefits and features you should be aware of and might want to include:

• Total disablement benefit. This is the benefit that's paid if you're disabled due to an injury or illness and are unable to perform work duties.
• Partial disability benefit. This is the amount that is payable in the event of partial disablement e.g. loss of one arm, one leg or sight in one eye.
• Buyback option. If your TPD cover is part of your life insurance, when a TPD claim is paid, the amount will be deducted from your life cover amount – a buyback option lets you reinstate that amount.
• Death benefit. A benefit amount may be payable in the event of your death, even if your TPD cover is a standalone policy.
• Loss of independence feature. In some cases the lump sum payment available with TPD insurance can convert to a loss of independence payout, based on the insured's ability to care for themselves.
• Guaranteed future insurability. This feature allows you to increase the coverage of your policy during important life events, such as marriage, children or mortgage, without needing to undergo another medical examination, even if your health situation has changed.
• Indexation benefit. Sum insured will increase annually in line with the Consumer Price Index (CPI) to keep up with inflation.
• Premium freeze option. This option allows you to choose to retain your current annual premium under a stepped style when you reach a certain age and it will reduce the insured amount gradually.

TPD insurance in super

TPD cover is sometimes included in the superannuation you receive from your employer. However, there are a few pros and cons of getting TPD insurance inside super.

Is TPD insurance included in super?

Yes, it often is. However, it's not available with every super fund so it depends on which one your employer uses. If you want to check the level of cover provided by your super fund, you can look at your member statement or contact your super fund directly.

While TPD insurance inside super is usually cheaper than standalone TPD cover, you often get what you pay for. TPD cover inside super can't tailor a policy to your personal needs so it more than likely won't be able to cover all outstanding debts if you do become permanently disabled.

TPD insurance tips

When taking out TPD insurance and calculating the cover you need, you should consider:

• Your debts. If you have a mortgage, loan or any debt, you need to factor that into the amount of TPD cover you need.
• Your level of health insurance. If your health insurance won't cover all the medical bills should you become permanently disabled, factor the costs into your TPD coverage.
• Your super fund. If you have TPD insurance inside super, you might be able to receive a small payout through your super as well.
• Family assistance. If you or your partner become disabled, who will take care of the home duties? You might need to consider budgeting for family assistance.
• The level of coverage you want. Are you willing to sell your home and move somewhere cheaper? If not, then you want enough coverage to pay for all your debt repayments.

FAQs

• How much TPD insurance do I need?

  When determining how much TPD insurance you may need, the general rule of thumb is to take out coverage that is 10 times your annual salary. However, everyone is different so you should consider your own circumstances and obtain advice on the appropriate level of cover for you.

• Can you add TPD insurance to my life insurance policy?

  Yes, you can add TPD cover onto your existing life insurance policy to have a more comprehensive coverage.

• Can a self managed super fund (SMSF) own a TPD insurance policy?

  Taking out insurance through a superannuation fund is a common option and if you have set up your own SMSF then your fund can own your TPD policy. In the event of a claim, the benefit is paid to your SMSF and you must meet the guidelines for a superannuation TPD policy to allow you to withdraw the benefit payment before your retirement.

• Do TPD policies have a waiting period?

  Depending on the policy you choose, you may be required to be unable to work because of an illness or injury for at least three to six months, before you start receiving any benefit payouts.

• Does TPD insurance cover loss of hearing?

  This is a little more tricky. In order to trigger a payout, TPD policies require the policy owner meets the criteria of total and permanent disablement as a result of their illness or injury.

  Meeting the criteria

  Depending on what's decided on when you apply:

  • You will need to be unable to work for a consecutive number of months in your own occupation (easier to prove)
  • Or unable to work for a consecutive number of months in any occupation (harder to prove)
  • Ongoing care is also required

  The person claiming will need to seek the ongoing care of a medical professional. The insurer must also deem that the severity of the sickness or illness means that the insured is unable to ever work in regular remunerative work for which they are fitted either by education, training or experience. For an increased premium applicants can elect to take out cover that will provide a benefit if they are unable to return to their own occupation.

• What illnesses or injuries are excluded from a TPD policy?

  In most cases only intentional, self-inflicted injuries will be excluded from receiving a successful claim payment.

• Is a TPD benefit paid from the benefit of a linked life insurance policy?

  When your policies are linked and you make a successful claim on your TPD policy, the benefit you receive will be deducted from your life insurance amount. If you don't want your life insurance to be affected by a TPD claim, you can choose a double TPD policy, a TPD buyback benefit or a standalone TPD policy.

• Does TPD insurance cover you when you're overseas?

  You can find TPD policies which will cover you for illnesses or injury you incur while you're travelling overseas or living overseas for an extended period of time. Just make sure you check the conditions of your particular policy with your insurer.

• Who is eligible for the National Disability Insurance Scheme (NDIS)?

  In order to qualify for the NDIS, you need to be a resident, permanently disabled and under 65. While the scheme is a great option if something bad happens, it often doesn't cover all your needs and expenses, which is where TPD insurance comes in.

• What is the difference between TPD and trauma or income protection insurance?

  TPD cover pays a lump sum for big expenses like mortgages, while income protection usually functions more like an income, paying you a monthly benefit of up to 75% of your income. Income protection also has a cap, depending on your policy, at which point your insurer will stop paying you. Trauma insurance, on the other hand, pays for critical illnesses and incidents in a lump sum but not permanent disablement.

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