Term Life insurance provides for the payment of a lump sum in the event of the death of the life insured.
Total and Permanent Disability (TPD) insurance provides a lump sum benefit as a result of the total and permanent disablement of the life insured which prevents them from working. TPD insurance provides more comprehensive cover than death cover alone.
There is little ambiguity as to when a Life insurance policy become payable however the criteria for the payment of a TPD benefit does vary slightly. TPD cover is designed to pay the insured a lump sum in the event of the death (as per above) or total and permanent disablement of the life insured.
This requires the insurance company assessor to be satisfied that a claimant will never return to their occupation, or one for which they are suited by education, training or experience.
This latter statement is the major point of differentiation between TPD policies. You may see the term “own occupation” versus “any occupation”.
Own Occupation
If your contract contains this definition then to qualify for the insurance payout you must no longer be capable of doing your actual job.
Any Occupation
If your contract contains this definition then to qualify for the insurance payout you must no longer be capable of doing any job that you are suited to by way of education, training or experience for eg a qualified lawyer or accountant could still do simple clerical jobs even if they were incapable of carrying out the more technical aspects of their original duties.
The “any occupation” definition is typically found in superannuation policies.
Real Life Example
Sean ran his own drink delivery business. Unfortunately in his early 50’s Sean was diagnosed with cancer in his spine. The severity of the disability meant that Sean was no longer able to work ever again. His policy was held in a non-super policy under the own occupation definition and he received a payout in excess of $350,000.
This information is of general nature only and is not intended as a personal advice. It does not take into account your particular investment objectives, financial situation and needs. Before making a financial decision you should assess whether the advice is appropriate to your individual investment objectives, financial situation and particular needs. We recommend you consult a professional financial adviser who will assist you.
