TPD (Total & Permanent Disablement)
Eight Suppliers - Multiple Options
We believe that this benefit has been one of the most misapplied benefits of all risk benefits available. We are constantly coming across clients who have been sold this benefit wrongly and the benefit in a majority of cases would be UNCLAIMABLE.
Total and Permanent disablement typically comes in three types (Own, Usual or Any) and effectively means that the life assured has suffered an event that has TOTALLY and PERMANANTLY DISBLED them, they have been like this for 6 months or more (some now have reduced this term to 3 months) and he/she WILL NEVER WORK AGAIN.
- OWN - means they can't do the occupation that he/she was engaged in just prior to the incident that resulted in he/she being TPD. This is usually reserved for occupation classes 1, 2 and 3 for some suppliers but not all (low manual percentage).
- USUAL - means that they can't do a range of occupations that he/she may be qualified for by their education and training (like occupations). This tends to be a definition that falls in the middle ground.
- ANY - means that they can't do ANY occupation, which we believe is the worst classification of this benefit. There is a saying in the industry that "if you suffered an event that resulted in you becoming a vegetable, but you could lick stamps and earn an income, this benefit would not be paid". We come across so many clients that have been sold TPD under this definition. These are typically older contracts, (where at the time the better definitions may not have been available). Most Bank contracts use this definition.
Clients/salespeople sometimes make the mistake with this benefit when talking about it, that because it is inexpensive (when you are young), that it should be included. We believe it should be discussed and if required, the best definition (own occupation) should be used in all cases where possible. If own occupation is not available due to the occupation of the client, then go to a supplier that has the "usual occupation" definition.
It also needs to be understood that this event is highly unlikely to happen and we would rather clients apply their budget to more claimable benefits such as trauma cover or income covers.
TPD can be a good back stop, provided it is applied correctly.
THINGS TO BE AWARE OF WITH TPD COVERS
- Using the wrong classification "any occupation" when client can get "Own or if need be - Usual occupation".
- Making the mistake that because it is cheap you should have it. Insurance works the other way around - a benefit that is cheap is usually that way because it is unlikely to happen. We also come across this issue with "death by accident insurance etc". With insurance cheap is not always best.
- Thinking this is Income protection insurance (Income covers pay a monthly benefit on claim). This benefit, pays a lump sum but only after a qualification period of 6 months (some now 3 months) and you will never work again (subject to policy terms and conditions).
- Some will pay on loss of "Use" of limbs other will only pay on the actual loss of the limb (cut off).
Please tell me more about TPD Cover
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