When you buy TPD insurance or income protection, you'll usually get to choose if you want own-occupation or any-occupation cover. The latter is cheaper because the chance of a successful payout is lower.
If you have an own-occupation policy, you will receive benefit payment(s) if you are unable to work in your usual occupation or profession (i.e. the job you have currently been working in). This means you will be able to claim even if you can work in a different field.
However, Any occupation will only cover you if you are unable to return to the workforce in any job/role that is suited to your education, training or experience. This is a much broader definition that's harder to prove, so you might have to return to work but in a different role.
For instance, if you were a surgeon, you might have to return to work as a GP if you were no longer able to perform your duties as a surgeon as a result of your injury or illness.
It depends on your occupation and financial position. For a good idea of which occupation type you should choose, consider the following:
- Your job. In many cases, it makes more sense to choose an own-occupation policy. For instance, if you've invested a lot of time and effort into getting the position you are currently working in, then own occupation is probably your best option. If something goes wrong and you can't do your job anymore, it's highly unlikely you'll be able to find a job that earns you the same income. Own occupation makes sure those years of hard work, studying and training are protected if something bad happens.
- Cost. While any occupation can't provide the same security and peace of mind that own occupation can, you will likely pay lower premiums for an any-occupation policy. It might also be a good option if an injury that stops you working at your job means you won't be able to do most other jobs anyway. For instance, if you're an accountant, then you'll probably need a severe injury to stop you from working – which would stop you from working most other jobs too.
- Exclusions. For certain professions, you might not have an option. Many insurers do not cover trades such as electricians, carpenters and scaffolders with an own-occupation policy due to the likelihood of a payout.
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Pros and cons of own occupation and any occupation
To compare these two types of cover against one another, check out the any-occupation vs own-occupation pros and cons.
- You're more likely to have a successful claim (as it's easier to prove you can't return to your usual occupation)
- You won't be forced to downgrade to a different position if you can't do the same job
- More expensive than any-occupation cover
- Often will not cover high-risk jobs, such as some tradies, riggers etc.
- Cheaper than own-occupation cover
- You can get cover with most occupations.
- If you can return to work in another field, you won't receive a payout.
Own-occupation cover provides you with the greatest opportunity to make a successful claim because the terms are far more specific. With own occupation, you don't need to prove you can't work, you just need to prove that you can't work in the job you were currently doing. It basically means it's far harder for insurers to dispute your claim, so it'll be accepted quicker.
Conversely, the terms for any-occupation cover are quite broad so an insurer could argue that there are suitable jobs that you could perform, some of which might bear little resemblance to your previous occupation. The upshot of this is that any-occupation cover is the cheaper form of cover as it's harder to make a successful claim for a disability.
Does tax affect own occupation and any occupation differently?
Recent amendments to the tax act have made any-occupation cover preferable to own-occupation cover – at least for TPD insurance. This is because the new legislation has made TPD premiums tax deductible to the extent that they relate to a superannuation disability benefit.
TPD insurance and tax in Australia
This is defined as a benefit paid to a person because they suffer from ill health and have been certified as unlikely to ever be gainfully employed in a capacity for which they are reasonably qualified due to education, training or experience.
While most policies with any occupation cover have definitions quite similar to this, those with own-occupation cover are usually quite different, meaning that your TPD premiums won't be tax deductible.
No. You can no longer get own occupation inside super. This is mainly because insurance inside super is usually cheaper and less comprehensive. It's also often automatically included, and several occupations generally can't get own occupation because they're more high risk.
If you want own-occupation TPD insurance or income protection, you'll need to buy it separately.
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