A TPD benefit is a lump sum insurance benefit for people who are sick or injured and unable to work. More on what a TPD benefit is and what must be proven to be paid a TPD benefit can be found here. The amount of the benefit you will be paid is calculated in a number of different ways.
Superannuation-based TPD insurance policies
If your TPD benefit is available to you through your superannuation fund, chances are you haven’t applied for the TPD insurance cover (you may not even know that you have the cover).
This is because in most cases, superannuation-based insurance cover is automatically given to you by your super fund under a policy of group insurance. Group insurance policies cover many members at one time.
In other words, rather than ask you how much TPD insurance cover you want or need, the superannuation fund and insurer usually provide you with an amount of cover which varies according to your age. We call this “age-based cover”.
Alternatively, you may have contacted your super fund directly or via a financial advisor and asked for a particular amount of insurance cover. The benefit which you can claim will be that particular amount. If this is the case for you, the amount of the benefit which you can claim may go down as you get older, may increase along with the Consumer Price Index (CPI) or may stay the same.
If you want the amount of your cover to stay the same each year (ie, not reduce as you age), you can contact your superannuation fund and ask that the amount be fixed. If you fix the amount, you will likely pay higher premiums each year.
If you make a request to change your insurance cover, your super fund may ask you some questions about your health, work, etc before agreeing to your request.
TPD insurance policies which are not superannuation-based
If your TPD insurance cover is not provided by, or through your superannuation fund, you have probably applied for this cover by contacting an insurer directly or by speaking to a financial advisor.
If you have done this, the amount of your cover will be a particular amount based on what you decided you needed or that you were advised that you needed.
If you did this, the benefit you can apply for if you get sick or injured is unlikely to go down as you age. In fact, it is more likely that it will increase along with CPI.
So how much will I be paid if I make a claim on my TPD insurance policy?
Many people who cease work due to sickness or injury look at their superannuation statement or insurance schedule at the time that they are claiming and assume that this is the amount of the TPD benefit that they will be paid if they win their TPD claim.
This is incorrect.
The amount that you are paid if your TPD claim is successful is worked out based on the level of your insurance cover when you last worked.
Changes in the amount of your insurance cover after you finish working are unlikely to change the amount that you will be entitled to if you get sick or injured and make a successful claim.
Will I be entitled to the whole benefit?
If your claim is accepted by the superannuation fund and insurer, you will usually be paid the full amount which you are insured for at the time that you cease work.
It is very rare for a superannuation fund or insurer to make an offer to pay you an amount less than the insured amount. Having said that some super funds offer TPD insurance products which pay out the relevant TPD insurance benefit in instalments. For example, TPD Assist which is an insurance product provided by SunSuper.
Some funds pay only 80% of the insurance benefit which is written on your benefit statement if you cease work and will only pay the remaining 20% if you satisfy a more difficult, work-based TPD test (for example Catholic Super or MTAA).
We have acted for thousands of people and helped them win TPD claims.
In every case, part of our job is working out the amount of the insurance benefit which you are entitled to and then we do the hard work of getting the benefit paid to you.
How we charge
We are Australia's best value superannuation/insurance law firm. Other law firms charge nearly double (& sometimes more than double) what we charge. So, if you get a quote from them, or have a cost agreement, ask us what we will charge you.