Life Insurance Blog

What is total and permanent disability insurance?


Total and Permanent Disability insurance (or TPD) provides a lump sum payment if due to accident or sickness it is determined you will never work again.

Why do you need TPD Insurance?

Ask yourself the following question: What stops if I stop?

If tomorrow your income was taken away forever, how would you cope? Unless you are independently wealthy and working purely for the enjoyment, the answer is, you wouldn’t.

As shown in the AMP’s claim statistics (right), the causes of TPD are varied and do not discriminate by Age or Gender.

A Total Disability payout provides much needed financial support. It can be used to:

  • pay for recovery and rehabilitation costs
  • enable a family member to reduce their work hours to care for you
  • pay for professional care
  • reduce debt
  • create an ongoing income stream

Defining Totally and Permanently Disabled

One of the most important elements of a TPD insurance policy is the definition that will be used to determine whether a claim is paid. In general there are 4 common definitions offered by most insurers:

Own Occupation

To meet the Own Occupation definition of TPD you must be unlikely to ever work again in your current occupation.

Any Occupation

To meet the Any Occupation definition of TPD you must be unlikely to ever work again in any occupation any occupation that you are reasonably suited to perform, based on your education, training and experience

A practical example of the difference between Any and Own occupation is a surgeon contracts a condition that causes a loss of steadiness in his or her hands. While practicing surgery may no longer be possible, the doctor may be more than capable of acting as a General Practitioner. In this case, the insurer will pay an Own Occupation claim but is unlikely to pay if the policy has an Any Occupation definition.

Home Duties

A Home Duties definition is used for those whose primary responsibility is taking care of the many duties required to maintain a home. Under this definition a claim is paid when the person insured is unlikely to ever again be able to perform standard domestic duties such as:

  • Cleaning of the house
  • Purchasing household food and items used for cleaning
  • Preparation of meals for the household
  • Laundry services such as washing or ironing.
Activities of Daily Living

Activities of Daily Living (ADL) is the strictest of all TPD definitions and the least likely to occur. For this reason, it is usually only used for one of the following reasons:

  1. Due to medical history the insurer is unwilling to insure for one of the other definitions
  2. Due to a high risk occupation the insurer is unwilling to insure for Any or Own occupation
  3. To save cost but still protect against extreme disability

Under the ADL definition a claim will only be paid if the life insured is unable to perform any two of the following activities, such as:

  • Bathing
  • Grooming
  • Dressing
  • Eating and feeding
  • Bowel and bladder function
  • Mobility

Occupation Rating

Another important consideration for TPD is your occupation. During the application process, the insurance company will categorize your occupation according to its level of risk. E.g. an administrative office based occupation is considered lower risk than a builder. For TPD cover, higher risk occupations are charged more for cover. It’s, therefore, very important that before applying for TPD insurance you compare how insurance companies will assess your occupation.

We can help

While the above information covers the most important aspects of TPD insurance, there are many other considerations that may be important, depending upon your situation.
Our Personal Insurance specialists have access to 11 difference insurers and can provide you with comparisons and help finding the cover the best matches your unique need.

Stephen Handley
Stephen Handley
My name is Stephen Handley. I have over 20 years experience in IT, Project Management and Financial Services. By combining this experience, I hope to make it easier for Australians to find good quality and affordable life insurance. Furthermore, I am not connected to any life insurance company. So, in the unfortunate event of a claim, you'll have someone in your corner, representing your interests.