Total and Permanent Disability (TPD) insurance pays a lump sum if an illness or injury leaves you permanently unable to work. This can help with living costs, medical care, home changes and one‑off expenses.
What is TPD insurance
A permanent injury or illness can make it difficult or impossible to return work. TPD insurance pays a lump sum if you become totally and permanently disabled because of illness or injury.
Each insurer has a different definition of what it means to be totally and permanently disabled. It can cover you for either:
- Your own occupation - you're unable to work again in the job you were working in before your disability. This cover is more expensive and is usually only available outside super.
- Any occupation - you're unable to ever work again in any job suited to your education, training or experience. This cover is cheaper but has a higher threshold to claim, so it's less likely to pay out.
- Activities of daily living – you’re permanently unable to perform some basic self-care tasks, such as bathing, feeding dressing toileting and mobility, without assistance. This cover has the highest threshold to claim.
Read the product disclosure statement (PDS) so you know how your insurer defines a total and permanent disability. Call the insurer or your super fund if you have questions about the policy.
Decide if you need TPD insurance
When deciding if you need TPD insurance, and how much, think about the expenses you'll need to cover if you were permanently disabled and unable to work. These could include:
- living expenses for you and your family
- repaying debts such as a mortgage or credit card
- medical and rehabilitation costs
- modifying your home or car for accessibility
Also think about what you have that could help pay for these costs. This could include:
- private health insurance that can help pay for medical expenses
- if you have trauma or income protection insurance, that can help replace lost income.
- any savings or investments you could sell
- what support from family or friends may be available
The gap between the amount you have and the amount you'll need can be a guide as to how much TPD cover you may need.
If you need help deciding if you need TPD insurance, and how much, speak to a financial adviser.
How to buy TPD insurance
You can apply for TPD cover:
- inside super through your super fund, or
- outside super directly from an insurer, broker or financial adviser.
TPD insurance can be bought on its own or packaged with life cover. If it's packaged, your life cover may be reduced by any amount paid out on a TPD claim. Check the PDS or ask your insurer.
You can apply to increase the amount of cover through your super fund, and potentially some of the terms and conditions, if you need to – but compare the cover, cost and rules with other outside super policies before deciding.
Paying for default insurance through your super can be cheaper and easier than buying it directly, but default cover might not match your needs. Importantly, any TPD payout might also be taxed at up to 22% if you’re under age 60. So the payout you receive may not match the amount of insurance cover you think you have.
How TPD insurance premiums work
Insurers set premiums based on age, health, job and lifestyle. Premiums will generally rise as you get older. Some policies keep premiums fixed for a set time then change.
If your cover sits inside super, the cost of premiums is generally deducted from your super balance. That reduces your retirement savings over time.
Premium terminology to know is:
- variable age-stepped premiums - are based on your age and recalculated at each policy renewal.
- variable premiums - charge a higher premium at the start of the policy, but changes to the cost aren't based on your age, so increases generally happen more slowly over time.
Regardless of which way you choose to pay for your cover, premiums are not guaranteed and may change annually. Speak to your insurer or read the PDS for more information.
What insurers ask when you apply
Unless you’re getting default cover through your super fund, insurers will usually ask about your:
- age and job
- medical history and family health history
- smoking and lifestyle
- high risk hobbies or sports
If an insurer doesn't ask for your medical history, it may mean that the policy has more exclusions or narrower policy definitions.
The information you provide will help the insurer to decide:
- if they should insure you
- how much your premiums will be
- terms and conditions for your policy
Answer honestly. If you leave out important details, the insurer may change or cancel your cover or refuse a claim.
To understand what's covered under a policy and the exclusions, read the product disclosure statement (PDS).
Questions to ask before buying TPD insurance
Use this checklist when you compare TPD cover or speak with an insurer, broker or adviser. These questions help you spot gaps and hidden costs.
Questions to ask yourself:
check_box How much TPD cover do I need? Have I worked out the right amount of cover to pay for my needs?
check_box Do I already have cover in my super account? Do I already have default TPD cover through my super account, and do I know what other options are available through my super?
Questions for the insurer:
check_box What definition of TPD is used? Does the policy cover ‘own occupation’, ‘any occupation’ or ‘activities of daily living’?
check_box What exclusions apply? Are there limits for pre-existing conditions or risky activities?
check_box How will premiums change? Do they rise with my age or not? What other increases could happen each year?
check_box Are there waiting periods? How long will I need to wait after being injured or getting sick, before I can submit a claim? And how long does a claim usually take to assess?
check_box Will a TPD payout affect my life cover? Will a TPD payout affect my life cover or other benefits?
Extra questions if the cover is through your super fund:
check_box How do I access the TPD benefit?If the cover is in super, what rules apply to access it, and how will any payout be taxed?
check_box What happens if my super becomes inactive? Will cover end if I stop contributing or my super account balance runs out?
check_box What happens to the cover if I change jobs? Does changing employer change the TPD cover or conditions?
check_box Will I need medical checks to increase cover? What’s the process if I want more TPD cover than the default amount?
If you need to make a TPD claim, see making an insurance claim for information on what to do.
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