TPD Insurance vs Income Protection: Which One Should I Choose?
One of the most common questions insurers get asked is, ‘do I need TPD insurance or income protection?’
It’s a fair question – at first glance, they may even seem like the same thing, and while there are similarities between the two, there is also a list of differences. These differences are key factors in deciding which type of cover you should choose for your situation.
What is TPD insurance?
Total and Permanent Disability insurance provides cover, usually in the form of a lump sum payment, if you are diagnosed with a specified illness or injury and can no longer work in your usual occupation or any occupation for which you are trained or educated in. Note that TPD insurance is best suited to those who are likely to never work again due to their injury or illness.
These policies generally include major illnesses or injuries that could have a significant impact on your life.
Remember: the definition for TPD varies from policy to policy, so always check the fine print for a list of illnesses and injuries that pertain to the eligibility criteria.
Before you lodge a claim for TPD cover, your insurer will consider the following:
- Whether or not you are in the care of a healthcare professional who supports your claim.
- The type of treatment that has been prescribed by your healthcare professional and the regularity of your treatment.
- Whether or not the mental health condition you have been diagnosed with is permanent.
- The degree to which you may be able to perform your duties at your current workplace with some well-considered adjustments to your routine, or in a new role at another workplace.
What is income protection?
If you’re unable to work for a period of time due to illness or injury, you may be eligible for income protection insurance. If you are successful in your claim, payments to you are usually made monthly and you are usually subject to a waiting period (this can be anywhere from 2 weeks to 2 years depending on your cover).
Simply put, income protection insurance in Australia entitles you to:
- An ongoing monthly benefit of up to 75% (in some cases 85%) of your pre-tax income until you return to work.
- Funds to cover your debts and expenses in times when you are unable to work due to injury or illness.
- Financial protection for you and your family.
Can I have both at the same time?
Many people who receive income protection cover also receive TPD cover. Unfortunately, many people wait years before lodging a TPD claim because they believe that lodging a TPD claim will end their entitlement to income protection. This is not true at all – in fact, it is recommended that you lodge a claim for both income protection and TPD cover if you believe you’ll be out of work for an extended period of time.
Not being able to return to work because of an accident or illness can have a tremendous impact on your finances. Some may think sick leave or workers’ compensation might be enough for their circumstances, but the truth is if you are going to be out of work for an extended period of time, it’s best to think of the most appropriate form of cover.
At Life Matters Claims, we are advocates that manage your claim from start to finish and have a 100% success rate for all our clients’ claims to date.
Get in touch today to learn more about how we can help you with your claim.