Most Australians understand that life insurance could protect themselves and their families financially if a death occurs. But when illness or injury leads to permanent disability that renders you unable to ever work again, are you sure you have the right type of insurance in place to cover your bills, maintain your lifestyle, and pay for ongoing medical treatments if you need them?
Total permanent disability insurance (TPD) provides cover when an insured individual is permanently and completely disabled. Unlike income protection insurance, which pays a percentage of your income while you recover from an illness or injury, TPD insurance provides a lump sum payment, and could be used to pay for medical costs that exceed your health cover, to pay off debts, and to maintain your lifestyle after having been advised by a physician that you may never be able to work again.
Since Total Permanent Disability cover is very specific to permanent, life-altering disabilities, it may be an additional benefit to consider adding to your life or trauma insurance plan, in addition to or as a considered alternative to income protection cover depending on your situation. There are four main types of TPD cover; to determine which might be best for your needs, it’s best to compare TPD plans and get to know what different policies offer.
The four major TPD plan types include:
- Own occupation – The policy holder has been told they will never work in their own occupation again, for the remainder of their life.
- Any occupation – The policy holder us unable to work in their own or a similar profession (which they have accomplished through education, training and experience) for the remainder of their life.
- Home duties – The policy holder has become unable to perform any domestic chores or responsibilities for a period of at least three months. This specific type of TPD cover requires additional scrutiny of medical evidence to identify the level of incapacitation.
- Modified – The policy holder is totally and permanently disabled and unable to function without assistance from someone else, or who suffers cognitive impairment that causes them to require constant supervision, permanently. The disabled policyholder must also have been disabled for a minimum of three months preceding the TPD insurance claim, permanently and totally unable to perform without physical help from someone else, or suffers cognitive impairment requiring permanent and constant supervision.
Comparing TPD insurance plans is a great way to find the best option for your particular needs. By visiting the MultiCover.com.au website, you can access a wide selection of TPD providers and weigh in on the differences offered with each plan. TPD coverage could provide the compensation you need when you can no longer work, and have no source of income when their paycheck is no longer coming in.
Each plan varies in its benefit period, which is why it is so important to compare TDP benefit policies before choosing one. In some cases, a plan that offers an extended benefit period may seem like the best option, but for some, a shorter benefit plan makes more sense. Talk to an insurance or financial professional and find out more about which TPD insurance coverage may work best for you.
Since the amount of compensation and length of benefit periods offered could vary from one insurance provider to another, both factors could reflect in the premium you pay each month. To compare TPD plans, visit MultiCover.com.au to review different plans available through a variety of insurers.
To clarify the potential benefit of TPD insurance and what it could mean to ordinary individuals, below are two examples of two people, one who did not have TBD cover, and another who did. Please note that the names and some details have been changed to protect their privacy.
Case Study 1:
- Status: Age 28, single
John, like most young people, never imagined the possibility of becoming disabled or losing his ability to earn an income. He never gave much thought to the financial impact that being unable to work could have on his life.
John has no children, but he owns a home, and has a mortgage of $250,000. His income is $68,000 per year, and has very little in savings after paying his mortgage and other expenses. John has never conferred with a financial advisor.
One day, John fell off the roof of his home while doing some routine maintenance, landed on his back. He was permanently paralyzed from the neck down in the fall; at 28 years old, John was told he will never be able to work in any capacity again.
The consequences of this accident were catastrophic. John is faced with selling his home and moving in with his parents. He will no longer receive any superannuation from his employer, which may have a long term impact.
His parents will need to renovate their home in order to make it wheelchair accessible, and their retirement plans will be greatly impacted, as they will now be supporting their son, perhaps for the rest of their lives, and retirement may no longer be an option. Had John had a TPD policy in place, he could have paid off his mortgage, made the handicap accessible renovations necessary to his home, had adequate home health care and rehabilitative services, and cash to pay his bills. It would also have made up for the loss of his superannuation.
Case Study 2:
- Status: Age 31, married, two children
Sam was an IT consultant, married with two young sons living quite comfortably with no health problems. As was his daily habit, Sam went bicycle riding before work one morning and was hit by a delivery van. When he awoke in the hospital, he was told he had suffered serious spinal injuries and may never again breathe unassisted. He is now a quadriplegic.
Sam had taken his financial advisor’s advice and had a TPD insurance policy in place for $1.4 million. Once the claim was completed, Sam had the full claim amount transferred into his savings account.
Had he not purchased a TPD insurance plan, Sam and his family would have experienced serious difficulties in covering their mortgage and maintaining their lifestyle.
Despite being confined to an electric wheelchair, Sam is a healthy young man, not ready to give up on leading a normal life. Using part of the proceeds from the TPD insurance, he and his family travelled to the U.S. where Sam underwent intensive rehabilitation in an effort to walk again.
The rehabilitation was extremely expensive, and without TPD insurance it would have been completely out of the question. It was the type of advanced rehabilitation that is simply not covered by private healthcare.
Thanks to the intensive rehabilitation and Sam’s very strong will and determination, he is slowly starting to regain the use of his legs and can now walk very short distances unaided.
Without TPD insurance Sam and his family would never have been able to afford the hundreds of thousands of dollars required for the rehabilitation, but thanks to his TPD cover, he is well on his way to enjoying a better quality of life than would have been expected.
The good news is that even if Sam can start working again, his TPD insurance claim will not be affected. This removes any deterrent to getting himself back into working condition.
Find out more about different TPD plans available to see if one is a good fit for you and your family by visiting the MultiCover.com.au website.