If you have a total and permanent disability insurance cover, you will get a lump sum amount of money only if you have a disablement that is confirmed to be both total and permanent. The disablement should be to the extent that you are unable to ever work again. You can take out your TPD insurance as a standalone policy, or you can go with the Australian Super TPD insurance.
In general, the total and permanent disability is normally defined as the loss of sight; the loss of arms or legs or the inability to resume work for six months because of an injury or illness with no hope of resuming normal work.
The total and permanent definition may vary between various providers and therefore to be on the safe side, it is advisable to read the product disclosure statement which will let you know exactly what you are covered for by a specific provider.
Any And Own Definition
The two definitions used in TPD insurance are the "any" and "own" definition. The "own occupation" definition means that you are permanently disabled; you are not able to carry out your duties in your usual occupation for six months and you may never resume your full time occupation. On the other hand, the "any occupation" definition means that you are permanently disabled; you are not able to carry out your duties in your usual occupation for six months and in addition, you are not able to engage in any occupation for which you are suited through training, education and experience.
Looking at the definitions, the own occupation will definitely offer you more flexibility. However, this cover is usually more costly and there are occupations that may not be covered under the own occupation definition.
The third TPD insurance definition applies to homemakers and is known as the home duties definition. If you are involved full time in domestic duties, then this definition applies to you. The duties included in the cover are cooking and cleaning, care of the home, care of dependent children and managing the household. You will be able to claim benefits once you are unable to carry out these domestic duties for six months due to disability if you are not likely to resume your normal duties.
You have the option of taking out your TPD insurance through a superannuation fund. In this arrangement, a trustee of a super fund that is eligible owns your insurance policy, and you are then a contributing member of the fund. Your trustee will then use your contributions to pay your insurance premiums and these premiums will normally be tax deductible. You can also take out your TPD insurance through a self-managed super fund.
One of the benefits of taking out an Australian super TPD insurance is that your premiums are paid from your contributions to the fund, and these are tax deductible, making the premiums more affordable. You can also decide to have a smaller take home income, allowing more of your income to go to your super fund and as a result more income goes into your TPD insurance. You can then benefit from a lower income tax obligation.
Kerrie Peacock is an insurance enthusiast who spends a lot of time researching on various insurance options available in Australia. For more information on life insurance premiums, visit www.mecovered.com.au/australian-super-tpd-insurance.