How to Claim Total and Permanent Disablement Insurance
When you rely on your income to pay the bills and support your family, you probably require some form of protection against the possibility that you can't work because sickness or injury has left you totally and permanently disabled.
TPD insurance pays out a lump sum benefit in the event of a successful total and permanent disablement claim. However, whether your TPD claim will be successful or not depends on various factors, including the TPD definition that applies to your cover and whether your policy is held inside or outside your superannuation fund.
Read this article to gain clarity on what exactly TPD covers, the steps you must follow when submitting a claim and whether you’ll have to repay the benefit if you are lucky enough to one day return to work.
What is considered total and permanent disablement?
You are generally considered totally and permanently disabled because when a medical practitioner is convinced that the accident or sickness has left you incapacitated to such an extent that it's very unlikely that you'll ever work again, as per your TPD definition: Own or Any occupation, Home duties or Modified TPD.
you are considered totally and permanently disabled when you suffer the total and irrecoverable loss of:
- Use of both your limbs, or
- Sight in both eyes, or
- Use of one limb and the sight in one eye.
Your TPD definition will generally determine whether a TPD claim might be valid or not. Depending on your insurer, the following definitions could be available:
Generally, a benefit will be paid if you become totally and permanently disabled and can no longer work in your specific/current profession, because of an illness or injury.
A successful TPD claim is usually defined as total and permanent disablement because of sickness or accident leaving you unable to work in Any occupation for which you are reasonably suited to by education, experience or training.
An illness or injury has left you totally and permanently disabled and thus incapable of performing all your regular domestic duties, such as driving a car, shopping for food and cooking meals, cleaning the house, doing the laundry or caring for your dependent children.
The accident or sickness has led to your total and permanent disablement, and you can no longer perform least 2 of the 5 Activities of Daily Living, including Eating, toileting, bathing, dressing and moving in an out of a wheelchair or bed without assistance from another person.
How to claim TPD insurance in 5 steps
Step 1. Contact your insurer
If you think you might be eligible for a claim call your insurer's claims department as soon as possible and request that they send you the necessary claim forms. This is also when they will usually explain the whole claims process to you.
Step 2. Review your policy documents and claim forms
Your product disclosure statement (PDS) and insurance documents should clearly state which criteria regarding your TPD definition you need to meet for a claim to be valid.
Step 3: Wait for 3 to 6 months
This waiting period will differ from insurer to insurer. During this time, you might have to follow and actively participate in any recommended course of treatment and rehabilitation. Your medical examiner will then generally have to provide a certificate stating that you are totally and permanently disabled.
Step 4. Go to a medical practitioner
To lodge a successful TPD claim, you need meet the TPD definition as per your policy terms and conditions to show evidence that because of an illness or injury you are unable to continue working. The insurer may request a second medical opinion, this is usually called an Independent Medical Examination (IME).
Step 5. Complete and submit the claim forms
Include all the relevant documents and medical information the insurer requested.
Apply for a TPD policy
How much money do you get?
If you meet the insurer's definition of TPD, you will typically get a lump sum pay-out equal to the amount of cover you're insured for. Review your insurance documentation for the exact amount. However, if you've only suffered partial and permanent disability, for example, loss of one arm, one leg or sight in one eye, the insurer might pay you the lesser of 25% of your total sum insured or a specific amount.
Claiming TPD standalone vs combined
You can usually buy TPD insurance as a standalone option or in combination with your life insurance policy. When claiming on a stand-alone policy, the benefit you'll receive will usually not affect the benefits you have with different cover types.
When claiming on a combined TPD and life insurance policy, your total amount of coverage will generally reduce by the TPD lump sum paid. However, this option is usually more affordable than a stand-alone plan.
If you have a combined life and TPD plan, you may also want to consider adding a TPD buy-back benefit or Double TPD benefit, which you can generally add for an extra fee, depending on your insurer.
Are TPD claims tax-free?
If you have a TPD policy outside of super, then your lump sum benefit will usually be tax-free as it is not considered taxable income. However, if your plan was purchased through your superannuation fund and you need the payout before your preservation age, a percentage of your benefit might be taxed.
How long does a TPD claim take?
The entire claims process usually takes a number of months, especially with all the documentation required proving that you are unable ever to work again. Generally, you’ll need to be absent from work for at least 3 to 6 months, depending on your insurer, before you can lodge a claim. The amount of time the whole claims process takes, usually depends on:
- The speed at which you've submitted your completed claim forms.
- How fast you send them all the relevant supporting medical information regarding your total and permanent disablement.
- The insurer’s claims process, which is different from insurer to insurer.
Claiming TPD inside super
When holding a TPD insurance policy through your super fund, the claims process may take longer because there's usually an additional step you'll need to comply with. First, you need to meet the insurer's definition of a successful claim; then the lump sum will generally be paid to your fund, where the trustee will then assess whether your total and permanent disablement definition meet the condition of release under the SIS legislation.
Frequently asked questions and answers
Can you claim on multiple TPD policies?
Generally, you might be able to claim total and permanent disablement from more than one policy, but it all depends on your insurer, the cover amount (you can’t be better off disabled, than you were before the accident or sickness) and the TPD definition you have, as well as whether it's inside or outside of superannuation.
Take note: When taking out more than one policy, you must disclose to the life insurance company that you have coverage with another insurer, as well as the amount of cover you have.
Can you claim on both income protection and TPD?
Yes, if you are unable to work due to an accident or illness and are totally and permanently disabled, you could claim on both income protection insurance and TPD insurance. However, it’s best to consult your policy documents as the terms and conditions may change from one insurer to another.
Will my death benefit still payout after I’ve received a TPD claim?
If you have a policy that combines life insurance with TPD cover and you make a TPD claim, then your overall cover amount will usually be reduced by the lump sum benefit paid out. The remaining life insurance amount will then generally be paid to your nominated beneficiaries when you die.
However, when you have a combined policy, with your TPD cover amount the same level as your life insurance cover amount, you’re remaining lump sum will be zero when a TPD claim is paid.
Can you claim TPD for mental illness?
Generally, you can claim TPD for depression and other mental illnesses on a fully underwritten policy when you meet the insurer’s definition of an insurable event and are disabled to such an extent that you can’ work for longer than your waiting period.
Compare TPD policies from major insurers
The main difference between critical illness and disability insurance is your ability to continue working. Find out which is best suited to your circumstances.
TPD insurance provides you with a lump sum benefit if you become totally and permanently disabled due to an illness or injury. Find out how TPD can work for you and which of the 4 definitions suits you best, including Own or Any Occupation, Home duties or Modified. Compare disability quotes in less than 60 seconds.
Total Permanent Disability (TPD) insurance is additional cover which provides a lump sum in the event that the insured suffers total & permanent disability.
TPD Insurance can be funded through superannuation, learn the limitations of this from our working examples of having your TPD in super.