Disability CoverA lump sum payment should illness or injury mean an inability to work and provide income to meet your financial needs. You decide on the purpose of the funds, which are usually used to reduce or repay debt, provide home modifications, additional care or create an investment fund to generate ongoing income.
Total and Permanent Disability (TPD) provides a lump sum payment should illness or injury result in a permanent inability to work. This will then provide a lump-sum to compensate for the financial loss of income.
This is a cost effective insurance to have within your risk management plan but many people are not aware of it and most banks and insurance brokers do not use it.
If you are going to include it in your risk management then you need to make sure that you use the best policy definitions.
The Two Common Policies
There are two commonly used definitions within Total and Permanent Disability (TPD) policies;
Any Occupation – this is the most commonly used definition; however it means that you are unlikely to ever be able to resume (whether for reward or otherwise) any other occupation or profession for which you are suited to by way of education, training or experience.
Own Occupation – this is the better definition to have with your Total and Permanent Disability (TPD) policy as it states that a claim would be paid if it was deemed that you are unlikely to ever be able to resume (whether for reward or otherwise) your own occupation or profession that they were employed in immediately prior to the commencement of total and permanent disability.
There are many occasions where you may be able to return to work in a lesser role (with a lower income) and therefore a claim under the “any occupation” would not be accepted; however a claim under the “own occupation” would be.
Wherever possible we would try to ensure that you have the “own occupation” definition.
There are other definitions too that cover more serious disabilities which are used for situations where you may not have been working at the time of a claim. Please always speak to your adviser and refer to the policy wording for more detailed information.