‘What if’ is something no one wants to think about. However, planning for the what ifs in life can help protect you, your lifestyle and your family if something does happen to your ability to earn or to support your family. This concern is when people typically start to look at if they need TPD vs. income protection and what each covers.
It may not actually be a case of if you need TPD or income protection, but potentially needing both. Use this guide to help you learn the basics about both TPD and income protection, when you need each and what they cover.
The Difference Between TPD & Income Protection
There is a big difference between TPD insurance and income protection. One offers on-going financial support if you’re unable to work due to temporary illness or injury, while the other is a lump sum payment and potentially other support if there is evidence to suggest you have a lasting disability preventing you from working. Learn more about each below.
What is Total and Permanent Disability (TPD) insurance?
Total and permanent disability, or TPD, insurance pays out a lump-sum if you become severely ill or injured to the point of permanent disability, and doctors determine you may not ever be able to work again. The goal is to help you continue to cover living and medical expenses even when you’re not able to bring in income any longer.
What is income protection?
Income protection is a type of insurance that pays a monthly benefit if you are unable to work due to a temporary injury or illness. It replaces a portion of your income, typically up to 70 – 85%, for a set period of time, designed to help you continue covering essential living expenses, such as housing, food and bills.
Who should get income protection vs. TPD insurance?
As you can see, income protection and TPD insurance cover you for two very different moments in time where you may be unable to work or cover expenses. With this in mind, you may need to consider both TPD and income protection to cover you for temporary and permanent injury or illness. You can’t predict which you’ll need or when, so both types of cover can help you feel more secure for your own future, as well as your family’s.
What does TPD cover?
What TPD insurance covers can vary between policies. Each policy will have different definitions of what it means to be totally and permanently disabled, as well as either covering you for your own occupation you’re trained or experienced to work or any occupation.Your own occupation cover tends to be more expensive, while any occupation is typically cheaper, but is less likely to pay out. An insurance broker can determine the right cover.
The most typical conditions TPD pays out for includes being permanently unable to work due to:
- Musculoskeletal disorders, including back and joint injuries
- Cancer
- Heart Disease
- Chronic illness
- Depression and PTSD
What does income protection cover?
Income protection can be included as part of your superannuation package or be independently purchased through an insurance provider. When you’re eligible to make a claim and when it will pay out depends on your specific policy, however, you will typically need to meet a waiting period, have a doctor’s certificate confirm you’re unable to work and meet your insurer’s definition of disability.
The most common claims for income protection are for being temporarily unable to work due to:
- Accidents
- Musculoskeletal issues
- Mental disorders
Insurance Advisers Top Tip:
A good broker will be able to walk you through things like definitions, exclusions, benefit periods, claim support and how they’ve matched those to your job, debts and family situation, not just the price. If they can clearly explain those differences, you’re not just paying for a middleman… you’re getting professional risk insurance advice. If they can’t answer that question properly, they’re probably not adding as much value as you think.
How an insurance broker can help you answer, ‘Do I need TPD insurance or income protection?’
There are many benefits of using an insurance broker over going direct for both income protection and TPD insurance. They can help look at different types of cover from different providers, shortlist options and give you the most relevant cover to choose from.
The Insurance Quoter provides free, no-obligation consultations to help you explore your options so you can make an informed decision about the right cover for your lifestyle. Book yours today.
