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TPD insurance will pay a lump sum if the insured is totally and permanently disabled as defined by the policy due to illness or injury. TPD is an abbreviation for Total and Permanent Disability Insurance, and provides capital so that the insured is able to survive and maintain their lifestyle if unable to work again. The lump sum benefit payout may provide vital assistance in paying for the medical and rehabilitation expenses related to the disability, the cost of necessary home modifications, or to hire home care services including nursing, cooking and cleaning.

Assistance if unable to work again

TPD cover through insurance may provide vital assistance to the insured and their family if they are unable to work again.

• To provide capital needed to survive
• To provide capital to repay debts
• To pay for unexpected expenses relating to the disability
• To make provision for retirement
• To maintain their lifestyle even if they can't work

Depending on the policy, TPD insurance may provide cover if the insured is unable to work again in 'any occupation', or alternatively if they are unable to work again in their 'own occupation' (that is, their usual occupation). These definitions generally require that the insured is employed on a full time basis, although some life insurance companies may offer a separate TPD policy for applicants undertaking home duties.

Payments are not usually made until such time as the disability has been evident for a period of six months, and it is deemed by the insurer that the insured is unlikely to work again based on the definition of the specific policy. Some TPD insurance policies may also pay a partial payment if the insured suffers total and permanent loss of sight or a limb - this will be fully detailed with applicable terms and conditions in the product disclosure statement.

TPD as an add-on or standalone

It is possible to buy TPD insurance as an add-on to term life, or as a standalone product. When TPD is added to a term life insurance policy, a lump sum payment for total and permanent disability is often an advance of all or part of the death cover, and the term life insurance payout on death may effectively be reduced by the amount previously paid for the permanent disability.

Taxation

When held outside of superannuation, TPD premiums are not tax deductible however the benefit payment is tax-free if paid to the permanently disabled person or a relative.