Total and Permanent Disability, also knows as TPD Insurance, will pay you a lump sum benefit payment if you are diagnosed as never being able to work again.
However, predicting the future is not an exact science, especially in the case of someone’s health. Opinions often differ, wich makes deciding the outcome of a TPD claim a difficult and often drawn out exercise.
Life Insurance is a legal agreement between you and the life insurance company and, like any contract, is filled with lots of words; many of which are open to interpretation.
For example. If asked, how would you define the word disability? The following definition is one we found using a quick onlin search
A disadvantage or deficiency, especially a physical or mental impairment that interferes with or prevents normal achievement in a particular area
If we go by this definition, just about everyone we know qualifies as disabled.
What about the following definition?
Impairment of mental or physical faculties that completely prevents a person from functioning normally.
Perhaps a little closer to what we would expect. But what does normal mean?
Normal for a professional athlete is likely very different to normal for a middle-aged smoker.
Why does it matter?
Insurance is designed to protect you from financial hardship when faced with an unexpected tradgedy. In the case of TPD Insurance, many people often have policies with benefits of hundreds of thousands, or even millions of dollars.
So when faced with the prospect of never being able to work again, it’s very important that the TPD insurance policy lives up to its promise of financial support.
All TPD insurance definitions are NOT created equal
In order to place some objectivity around declaring some TPD, life insurance companies have come up with the following definitions.
Using the Own Occupation definition, a person will receive a TPD benefit if he/she:
is incapacitated to such an extent as to render the Life Insured unlikely ever to be able to work in their Own Occupation;
Using the Any Occupation definition, a person will receive a TPD benefit if he/she:
is incapacitated to such an extent as to render the Life Insured unlikely ever to be able to work in any occupation for which they are reasonably suited by training, education or experience which would pay remuneration at a rate greater than 25% of the Life Insured’s earnings during their last 12 months of work;
Important Note: Wording for Any and Own occupation differs from one insurer to the next. Make sure you read the product disclosure document (PDS) before applying for TPD Insurance.
Price is what you pay. Value is what you get
By reading the above definitions, it’s probably evident that Own Occupation is a more likely to pay a claim than Any Occupation. Because of this, a TPD Insurance policy with an Own Occupation definition is more expensive than one using Any Occupation.
Also, only certain occupations are eligible for Any Occupation. But if you are eligible then your choice comes down to cost vs. benefit. Own Occupation costs more, but has the benefit of being more likely to pay a claim.
How we can help
Our life insurance experts can help you find the best balance between price and benefits. Check out our online life insurance quotes or contact us today.