Total and permanent disability (TPD) insurance is part of most superannuation fund offerings. It allows you to be paid a lump sum if you find yourself unable to work because of permanent illness or injury. For many people, the insurance they hold within their super is the only TPD insurance they have, but is it a good option? Or should you opt for a different kind of coverage?

What is TPD?

Losing your income permanently is a scary prospect, but permanent injury or illness can make this a reality which is why many people choose to hold total & permanent disability (TPD) insurance. It can provide the security of knowing that you will still be able to provide for yourself and your family.

The definition of ‘total & permanent disability’, and what that might entitle you to varies between insurers. The difference comes down to being unable to perform your own profession, known as ‘Own occupation TPD’, versus being unable to perform any profession. known as ‘Any occupation TPD’. These are two different types of cover with different costs and payout thresholds.

Insuring yourself against not being able to perform your own occupation is a more expensive type of coverage. The payout will be easier with this type of insurance, however, because it will be much more straightforward to determine your ability to perform the job you currently have. This type of TPD insurance is typically not available through your super.

The more broad insurance type, that of being insured against being unable to perform any job that is suited to your skills, experience, and education is more often the insurance type you have through your super fund. This is a cheaper insurance type, but more difficult to claim because you will need to be deemed unable to perform any job that could be suited to you.

Within your super, you may also have access to other kinds of insurance such as life insurance, which you can learn more about here.

Does my fund give me access to TPD inside super?

Total and permanent disability insurance in superannuation varies based on a couple of important factors. If you are under 25, TPD insurance is unlikely to be automatically included. Similarly, if your account balance is under $6,000, or your account is inactive then you won’t be covered with any kind of insurance.

Unless you fall into either of those categories, then you most likely do have default cover. Your super fund won’t discuss your options with you and instead will include coverage automatically. The type of coverage will be that of not being able to perform any occupation, not your specific job.

Does my fund give me access to TPD inside super?

Total and permanent disability insurance in superannuation varies based on a couple of important factors. If you are under 25, TPD insurance is unlikely to be automatically included. Similarly, if your account balance is under $6,000, or your account is inactive then you won’t be covered with any kind of insurance.

Unless you fall into either of those categories, then you most likely do have default cover. Your super fund won’t discuss your options with you and instead will include coverage automatically. The type of coverage will be that of not being able to perform any occupation, not your specific job.

How does Superannuation TPD work?

Insurance through Super has to comply with strict legal requirements, and because of that, your insurance policy through super will be more restrictive. The policy is cheaper but you will have more difficulty accessing the money.

One of the key distinctions is where the money goes once you have made a claim. With your insurance policy through superannuation, any payout goes directly into your super fund. This can make the money difficult to access without tax penalties if you are not of retirement age or don’t have a valid reason for withdrawal.

How much does it cost?

It’s impossible to give a one-size-fits-all answer to this question. Your choice of super will impact the cost, as will your age, health history, and a range of other factors. The big difference is that you won’t get to negotiate the specifics of your policy and change the price. It will be added automatically to your account.

The good news is that, regardless of the cost, it won’t affect your income. The cost comes out of your superannuation balance, making it a lot more accessible and affordable for many people. You do need to consider, however, that because the cost eats into your super balance, you will be left with less money come retirement.

What are my choices regarding my TPD in superannuation?

Each super fund is different when it comes to TPD, and it is important to consider what is right for you. You can use the Compare Super Insurance comparison tool on our website here to learn more about your options for insurance and compare super fund insurance offerings.

It is important to carefully consider the amount of insurance cover you may need in your life. Quite possibly, the TPD insurance you get through your super will not be enough to cover your and your family’s living expenses in the case of you not being able to work. In that case, you may wish to take out a policy outside of your super in addition to your existing coverage.

It’s important to go through a process of TPD quote comparison both inside and outside your super and consult with an expert to ensure that you have the right level of cover for your needs. Fill in the ‘Speak To An Advisor’ form on this page to get expert insurance and superannuation advice.

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