Total and permanent disability (TPD)

 

Total and Permanent Disability Insurance (TPD) provides a lump sum payment if you suffer a disability before retirement and can’t work again, or can’t work in your usual occupation or chosen field of employment. 

 

Payments under a TPD policy are generally not made until the insurer believes that you are unlikely to work again.  This usually occurs only after you have been unable to work for at least six months.

 

Can be purchased as an add on, or as a stand-
alone policy

You should consider which of the definitions best suit your particular situation.

 

Own occupation: you will be entitled to claim if you are unable to return to your ‘own’ occupation.

 

Any occupation: you will only be entitled to claim if you are unable to return to ‘any’ occupation you are reasonably suited to by education, training or experience.

 

Note: ‘own occupation’ is more expensive than ‘any occupation’ TPD.
 

Provides a cash lump sum that can be used by your family to:
  • Repay debts such as your home mortgage and personal loans.
     

  • Replace your income.

     

  • Meet medical costs.
     

  • Meet the costs of a modified lifestyle, e.g. nurse or carer and home and car modification.
     

You can buy TPD as an add-on to term life insurance, or as a stand alone product.

 

You can also get TPD as an extra benefit from your super fund or as part of a trauma insurance product.
 

There are different TPD definitions

Outside super

 

  • TPD premiums are not tax deductible; however the benefit payment is tax-free if paid to the injured person or their relative.

 

Inside super

 

  • Only the portion of a TPD insurance premium that provides disability super benefits to a member is tax deductible for the super fund.  The benefit payment you receive will be taxed as a lump-sum super benefit.
     

Tax treatment

How much TPD cover should I have?

 

When considering how much cover you need, you should think about:

 

  • Your financial commitments, what are they and how long will they last.

  • Repaying your debts.

  • Allowing for an increase in your expenses to cover the cost of ongoing care.

  • A lump sum amount to help cover the cost of any home modifications.

  • Whether any assets will be sold to help pay for these expenses.

 

We can help you work out an amount of cover to meet your requirements.
 

© 2016 Prospaerum Pty Ltd

Prospaerum Pty Ltd, trading as Prospaerum Financial Planning

Corporate Authorised Representative of Charter Financial Planning Limited

 

Australian Financial Services Licensee
Licence Number 234665

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