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TPD pays you a lump sum if you become totally and permanently disabled. The definition of total and permanent disability varies between insurance companies. It can mean that you are disabled to the extent that you will probably be unable to work again in your occupation or in any job.
Income protection insurance will help to replace a portion of your income when you are unable to work due to illness or injury, but if you are permanently unable to return to work it is also useful to have a lump sum of money to cover your immediate medical needs as well as to clear any outstanding debts. Total and Permanent Disability (TPD) insurance can be used for this purpose.
The appropriate amount of cover for you will depend on both your family and financial situation. Your income protection policy will be your main source of ongoing cash flow so TPD is primarily to provide for medical needs and the payment of debt. As a basic guide, a TPD policy may be used to:
Keep in mind that there is more to disability than just medical needs – your home may need some renovations so that you can get around in a wheelchair, a walker, or even a blind person’s cane.
|Jesse, aged 54, is married with two adult children. He and his partner own their own home but they have a mortgage of $350,000 on an investment property.
Jesse works full-time as a psychologist, earning $75,000 per year. Jesse has income protection insurance, but he also wants peace of mind that if he were to become severely disabled and unable to work, he and his wife could pay off the investment home loan. That would give his wife the flexibility to potentially scale back her working hours to take more of a primary carer role for him.
As such, Jesse has calculated his TPD insurance needs as follows:
$30,000 – Immediate lump sum for medical costs
$350,000 – Mortgage repayment
Total – $380,000
Jesse calculates that his 75% income protection policy would then be sufficient to replace his existing cashflow.
Please note this is just an example – the needs of each person will be different. As an information provider, CANSTAR only provides general advice and does not take into account your objectives, financial situation, or needs. You should talk with a financial adviser about your specific and individual needs.
The following premiums are current as at our 2016 Advised Life Insurance star ratings. Monthly premiums have been rounded to the nearest dollar.
|TPD (Male – Stepped)Monthly Premiums ($/month)|
|TPD (Female – Stepped)Monthly Premiums ($/month)|
|Source: www.canstar.com.au Average premiums current as at 17 August 2016. Average premiums have been rounded to the nearest dollar.|
There are a range of considerations when selecting a TPD insurance policy. A few common factors you should take into account include:
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