What should you be covered for with TPD?

What should you be covered for with TPD?

It’s a big question isn’t it, maybe the biggest when you’re looking at taking out a TPD (Total and Permanent Disability) insurance policy.

Life insurance is still, I suppose, the big one that most people take policies on.  If, heaven forbid, you have a medical condition or accident that ends your life your life insurance will be there to look after the loved ones and dependents you leave behind.  The money never of course replaces the person.  But if that person happened to still be a breadwinner, the financial hardship of living without them is alleviated.

But there’s a whole other side to insurance and in my opinion it’s just as important and, as strange as this might seem, can be possibly more stressful on the individual and their family than death.  It’s what happens in the event of you contracting a medical condition or having an accident that leaves you totally and permanently disabled and unable to earn a living.  In this situation adding to the stress that comes from the lost wage there’s also the pressure that comes with extra medical expenses for treatment or rehabilitation.

So statistically what are the events you should make sure you’re covered for?

As confronting as this might be let’s look at events that don’t take a person’s life but leave them totally and permanently disabled (TPD).  This is a pretty important category to be insured for.  AIA Australia, one of this country’s leading insurance providers, has released the following data around TPD claims.

In 2014 over 40%, their highest percentage of TPD claims they paid out, were for musculoskeletal conditions.  Across the gender divide these claims were spilt equally at 38%.

Musculoskeletal conditions affect the bones, muscles and their attachments, including joint problems.  There are more than 100 musculoskeletal conditions, with the most common being osteoarthritis, rheumatoid arthritis, osteoporosis and back pain. 

Conditions AIA’s customers claimed for included back or neck conditions, fractures, arthritis and injuries sustained in accidents.  The next highest category of claim was for neurological conditions at around 15% and this were split at 20% male and 15% female. 

Just behind this came mental health, with a claim rate by men of 14% and by women of 19%.  Followed by a broad category of “others” at 10% and 12% percent respectively. 

In the case of AIA the company paid out over $218 million in Total and Permanent Disability claims in 2014, which gives their numbers some weight. 

However as powerful as statistics are they aren’t ever going to be able to give an individual 100% guidance.  For example there might be a .00001 chance of you being rendered disabled by a falling elephant but if it happens to you it happens 100%. 

According to AIA, cancer accounted for 10% of overall TPD claims, 9% men and 11% women.  Whilst stroke came in at less than 5%, split 5% men and 3% women. 

So in looking at what your TPD policy covers you for it makes sense to make sure you’re covered for the situations that arise most often.  This needs to be tempered of course by your personal health and work situation. 

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Published on July 7-th, 2015 in TPD Insurance
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.

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