Many Australian workers will have TPD insurance, often held in their superannuation. Many workers also hold income protection insurance, but it’s not as common as TPD insurance. This article will look at the primary differences between income protection insurance and TPD insurance.
What is income protection?
Income protection or salary continuance benefits are insurance benefits that are paid to a sick or injured person each month that they are unable to work. The payments are made until the person can return to work, or until the end of the benefit period which can be 2 years, 5 years or until age 60, 65 or 70.
What is TPD?
Total and Permanent Disability (TPD) benefits are insurance benefits that are paid to a sick or injured person if they:
- cease work due to sickness or injury; and
- do not work for the waiting period (usually either three or six months); and
- after this time are unable or unlikely to be able to return to work that is within her education, training or experience.
Sometimes, the work incapacity must also include work that a person could be retrained to do.
Note: The definition for TPD varies from policy to policy and the above is simply a summary of a work based TPD definition. Each policy definition will be different.
An overview of income protection
If you have income protection insurance cover and decide to claim, you must show the following to be paid a benefit:
- That you are forced to cease work due to injury or illness;
- That you are unable to work for the relevant waiting period (usually 30, 60 or 90 days) and after that;
- That your doctor supports that you are unable to work. Usually, you must provide monthly forms completed by your doctor confirming your work incapacity.
Income protection benefits are paid monthly and calculated based on your earnings before you ceased work (pre-disability income).
Most often, people are paid a benefit which is between 75-85% of what they were earning before they were forced to cease work. (Note: policy requirements for income protection benefits vary and the above is simply a summary).
Sometimes income protection policies also pay superannuation contributions and other times they don’t. Each individual policy is different in this regard.
An overview of Total & Permanent Disability (“TPD”)
As we said earlier, TPD is a lump sum payment that you are paid if you are considered to be unable to work again (or in some other circumstances).
It’s important to note that not all TPD benefits are the same. Benefits like TPD Assist benefits are paid as a series of lump-sum payments annually over a number of years, provided the individual continues to be unable to work.
Other super funds do not offer lump sum benefits but provide lifetime pensions as an alternative. For example, at the time that this article was written, Super funds PSS and ESSS had this approach. The information in this article does not apply to these types of TPD benefits.
Can I have both income protection and TPD?
Yes. If you have cover for income protection and TPD, you can usually claim both and the claims do not usually impact each other.
Some people assume that they can’t claim a TPD benefit when they are being paid income protection or similar benefits. This is usually not correct. Many people wait years before lodging a TPD claim because they think that lodging a TPD claim will end their entitlement to income protection or like benefits.
Most of the time, people can claim, and be paid, a TPD benefit while receiving income protection or salary continuance payments without the TPD payment impacting their ongoing income protection entitlement. However, there are some exceptions.
Usually, the types of payments that stop when a TPD benefit is paid are referred to as “temporary”; for example, Temporary Salary Continuance benefits.
In cases where the payment of a TPD benefit ends a person’s entitlement to their income protection or like benefit, the insurer may decide to pay the TPD (even when it has not been claimed) so that they don’t have to pay the claimant as much income protection money. A decision to pay out a TPD benefit when a person does not meet the policy terms can be challenged.
Ceasing work and TPD/income protection claims
Usually, you can claim income protection and TPD insurance benefits even after your employment has been terminated. However, there are some superannuation funds/insurers that require you to continue to be employed to make a claim or to make a claim within a certain amount of time after you cease work (i.e. two years for example).
Seek advice from a TPD lawyer before you stop work - 03 9448 8048 - it costs you nothing to find out
Therefore, we recommend that you seek advice prior to terminating your employment if you are considering lodging an income protection or TPD claim.
Having said that, if you have already terminated your employment and are looking to claim TPD or income protection benefits, you should still get in touch and seek advice about whether the termination of employment has impacted your right to claim.
What if my TPD claim is ending my entitlement to income protection?
If you have an entitlement to both TPD and income protection benefits, it is possible that claiming a TPD benefit will end your entitlement to income protection or similar benefits. In all cases where there is an entitlement to both TPD and income protection benefits, we recommend that you contact us for some free advice before lodging any claim.
Find this article helpful and looking for some further advice or assistance? Feel free to get in touch with the writer, Tom Cobban.
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