For many of us, our ability to work and earn an income can be essential. It allows us to fund lifestyle expenses and work towards achieving our financial goals and objectives, now and in the future.

In our working life, we have a 1 in 3 chance of being disabled for more than 3 months* with a 35%^ chance of ever getting back to work.

If you were to become totally and permanently disabled due to a sickness or injury and unable to work again, total and permanent disability (TPD) insurance could help lessen the financial impact on you and your loved ones.

In terms of lessening the financial impact, this may include assistance with one or more of the following: debt reduction, income generation, lifestyle modification, and immediate and ongoing medical expenses.

When establishing a TPD insurance policy, many key factors are considered to ensure its appropriateness to your personal circumstances—inclusive of your ability to meet the insurance premiums—for example, the:

• sum insured amount
• premium type (stepped, hybrid or level)
• claim definition (any or own occupation)
• ownership structure (super, non-super or super-linked)
• pre-existing conditions, exclusions and loadings
• policy linkage (linked life, linked trauma, or linked life/trauma).

Other important factors are the specific provisions you would like included in your TPD insurance policy. Generally, these provisions can be categorised into core and supplementary provisions:

• Core provisions: features and definitions that are primary considerations when determining the need for TPD insurance. For example, a TPD insurance policy that provides a lump sum benefit payment in the event of your total and permanent disablement. Depending on your claim definition, this may be in your own occupation, or any occupation that you are reasonably suited to by training, education or experience.
• Supplementary provisions: other features and definitions that are secondary considerations when determining the need for TPD insurance. For example, a TPD insurance policy with a future insurability benefit allows you to apply for an increase in the policy sum insured amount on the occurrence of certain personal (or business) events.

The decision to choose a TPD insurance policy that either focuses on core, or a mix of both core and supplementary provisions, can come down to cost-versus-benefit, and your preference of insurance cover.

Importantly, while a TPD insurance policy that encompasses both core and supplementary provisions can provide you with enhanced coverage, it can often come with higher insurance premiums.

For example, in terms of enhanced insurance coverage, the following features and definitions discussed below are generally only available where supplementary provisions also form a component of a TPD insurance policy.

Please note: TPD insurance policy offerings can differ between insurers, so it’s important to read your relevant Product Disclosure Statement and your individual TPD insurance policy for further details.

Supplementary provisions

Grief support benefit

A grief support benefit, upon claim or benefit payment, may reimburse the cost of counselling sessions for you or an immediate family member.

Both the reimbursement amount and the number of counselling sessions available can be capped. For example, depending on an insurer’s TPD insurance policy offering, this could be up to $1,000 for up to four hours of counselling sessions.

Death benefit

A supplementary death benefit, upon an insurer’s receipt of your death or medical certificate, may provide a sum in the event of your death or diagnosis of a terminal illness. if the TPD benefit has not been paid or is not payable.

A death benefit can be capped. For example, depending on an insurer’s TPD insurance policy offering, this could be $10,000.

Financial planning benefit

A financial planning benefit may reimburse the cost of engaging a qualified financial adviser to prepare a financial plan following receipt of the benefit payment.

A reimbursement can be capped. For example, depending on an insurer’s TPD insurance policy offering, this could be the actual fee charged by the financial adviser, or $3,000—whichever is the lesser amount.

Future insurability benefit

Offered by some insurers, a future insurability benefit can allow you to apply for an increase in the sum insured amount—without medical underwriting—on the occurrence of specific personal or business events. This can be beneficial when there has been an unexpected health change after establishing your TPD insurance policy.

The qualifying events can vary between insurers. However, the most common can include marriage or divorce, giving birth or adopting a child, and taking out or increasing a mortgage.

Accommodation benefit

An accommodation benefit, upon benefit payment, may reimburse the accommodation costs of an immediate family member who has to travel, for example, more than 100 kilometres from their home to be with you.

Please note: This is in the event of your medically certified bed confinement as a result of the total and permanent disability.

A reimbursement can be capped at $250 per day for up to 30 days of accommodation, for example, depending on an insurer’s TPD insurance policy offering.

Moving forward

When it comes to personal insurance, it’s vital to understand your insurance coverage, inclusive of a TPD insurance policy. By doing so, you can be better informed in the event of a future claim.

If you need help in understanding the details of your existing TPD insurance policy, we are here to help.

Lastly, if you are considering establishing TPD insurance, please understand it’s not a one-size-fits-all approach. We can help you to establish TPD insurance appropriate to your financial situation, goals and objectives.

If you have any queries about this article, please contact us.

*The Institute of Actuaries of Australia (2000). Interim Report of the Disability Committee.

^Actuaries Institute, Actuaries Summit. Super, Life and General meet at the Crossroads.