Total and Permanent Disability Insurance
What is TPD insurance?
Total and Permanent Disablement Insurance (or TPD insurance) provides a lump sum payment in the event that you become totally and permanently disabled. However, it’s important to note that the definition of disability varies greatly from insurer to insurer.
Clients are required to meet a permanent incapacity definition under the Superannuation Industry (SIS) regulations whereby “your ill health (whether physical or mental) makes it unlikely you will engage in gainful employment for which you are reasonably fit by education, training or experience”.
TPD insurance options
There are two primary definitions of cover to consider when choosing a TPD insurance policy:
- Any occupation: where you had been away from work through injury or illness and are incapacitated to the extent that you will never work in any income generating occupation suited to your education, training and experience.
- Own occupation: where you have been away from work through injury or illness and you are incapacitated to such an extent that you are unlikely to engage in your own occupation.
How much TPD insurance do you need?
- A simple amount of cover = total debt plus up to 2 years income/salary Package
- A minimum amount of cover = total non-deductible debt (i.e. amount required to pay off your mortgage).
To find out the level of cover that is most appropriate for you, contact us by phone <LINK> or email <LINK>.
Taxation implications of owning TPD insurance within superannuation
Insurance proceeds are taxed as a lump sum superannuation benefit when paid to the member, although if the definition of a disability superannuation benefit can be satisfied, then the benefit will include an increased tax free component.
Can I bundle TPD insurance with Life Insurance?
Yes. However there are some regulations to be aware of.
If you become totally and permanently disabled and your TPD Insurance has been purchased as an option on the Life Insurance Superannuation Plan, the insurer will pay the benefit to the Trustee and the Trustee is then responsible for determining whether or not you satisfy the permanent incapacity condition of release under superannuation law before making the proceeds available to you.
The Trustee will have to consider whether you meet the permanent incapacity test (based on the ‘Any Occupation’ test) under superannuation law. If you do not satisfy this test, the benefit amount will be held in the fund on your behalf until such time as entitlement to the benefit is triggered as permitted under superannuation law, for example on your permanent retirement.
For further information, benefits and restrictions on TPD insurance when held under superannuation, please refer to the relevant Product Disclosure Statement provided to you.
Protect yourself with TPD Insurance
Speak to Russell Van Homrigh Financial Services to discuss your personal needs and circumstances. Call us to arrange an appointment with our financial advisor or click here to enquire about our wealth protection services including TPD insurance.
Russell Van Homrigh Financial Services and Russell Van Homrigh are Authorised Representatives of Synchon AFS Licence 243313.