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What is Total and Permanent Disability cover and how does it work?

Total and Permanent Disability (TPD) Cover is an easy one to explain, because it offers you just that – insurance cover should you become totally and permanently disabled.

There is some nuance to how it works, so let’s take a closer look.

What is TDP cover?

TPD is its own standalone cover, however it is also often included as a part of your trauma policy. Like trauma cover, it is a one-off, lump sum pay-out, and is not an ongoing payment like income protection.

To qualify for a TPD pay-out, you must be totally and permanently disabled. While the wording varies between providers (check out more on how we use this wording to find the best policy for you here), most commonly it is that you are so disabled that you are unlikely to ever be able to perform your occupation again, or any other for which you are suitably trained.

There are two types of TPD; covering either your ability to work in your own occupation, or in any occupation. TPD may not necessarily involve a significant accident or illness. For example, just the loss of the use of a hand would render a surgeon or chef unable to work in their profession again.

How much TPD cover do I need?

When deciding how much TDP cover you need, we calculate it along similar lines to life insurance. While income protection is seen as a temporary prop-up to get you through a rough time, with TPD cover you want to be able to extinguish all your debt. You may choose to pay off the mortgage, use it towards medical care, improve the accessibility of your home or workplace, or towards keeping your business afloat.

It is always good to have your adviser take you through the process of setting the level of cover, and conduct regular reviews of your policies to make sure you always have the right level for your life stage.

Do I have to be employed to get TPD cover?

As with trauma cover, you don’t need to be employed to get TPD cover. While the definitions and wording around what constitutes Total and Permanent Disability will change if you are not in employment, a pay-out will depend on whether you can perform home duties and activities of daily living.

How does TDP cover relate to trauma cover?

The key difference is in what the claim assesses.

When making a trauma claim, the claim is based on the cause of the trauma, or the diagnosed event. For example, a stage 3 cancer diagnosis will result in a trauma pay-out, regardless of the anticipated outcome of that diagnosis.

A TPD claim however looks at the anticipated outcome of the event, regardless of what caused it. For this reason, it is a good idea to have both (and they are often bundled together as a policy), as the TPD cover will catch what the trauma cover does not.

It is always important to talk to your adviser to make sure you have the right policies to meet your needs, and that you understand what each of them covers so you have the right expectations at claim time.

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