Total and Permanent Disability Insurance
The words total and permanent would seem to be clear and unambiguous.
But how bad does a disability have to be before it is regarded as total, and does the definition vary depending upon a person’s particular occupation? Does permanent really mean forever, and how can anyone predict the future capability of medical science to assist someone in their genuine desire to become productive in the workforce again?
Does such insurance only cover the work for which a person is currently skilled, trained and engaged in, or does such a payout require the inability to return to any form of work?
Having received a TPD payout, what happens if circumstances change and a return to work is possible, either in the original position, or in alternative employment?
The answer is …
It depends.
It is possible to have more than one policy that provides TPD coverage. It can be part of a superannuation package, mortgage insurance, or an insurance policy taken out privately.
As with many different types of insurance coverage, definitions can vary, not only between various insurers, but in different policies with the same insurer. As with all types of insurance, from vehicle to fire and flood, it is important to understand exactly what is covered, and the effect of altered circumstances after the event. Quality professional advice is crucial.
TPD payouts are generally in the form of a lump sum after the claim has been agreed. However, some insurers have now taken to paying the lump sum in instalments, with the total amount divided over perhaps six years – with circumstances reviewed annually. Presumably, this is to reduce unnecessary payments, or at least, payments that the insurers deem unnecessary.
Is TPD only for back injuries and such?
As with similar discussions on workers compensation, the only requirement is for the impairment to completely preclude the performance of work duties. Such impairment may be physical in nature – certainly, back injuries are prominent in some industries – or the issue may be in the form of mental illness. Both types are treated without prejudice in law.
Own occupation, or any occupation?
A TPD policy may provide coverage if there is a permanent inability to return to a person’s traditional work, in which they are trained and experienced. Alternatively, the policy may specify that coverage only applies if the policy holder cannot return to any form of paid work.
Knowing the specific policy coverage is paramount.
What if things change?
In either of the cases above, it is possible that circumstances may change over time after the claim was decided.
Where coverage is defined by an inability to return to the previous employment, it may be that a recipient can retrain in another area and eventually find gainful employment in a new field.
The classic example is a worker in say, construction, who has a bad back injury and is unable to continue in that work, but after retraining in a non-physically demanding area – perhaps in software support – a return to work in a new job may be feasible.
Claims are decided based upon circumstances and available treatments known at the time, but medical knowledge, surgical techniques, available treatments and drugs, can advance over time, hopefully allowing a return to work.
While every case must be examined on its merits, traditionally it has not been usual for TPD payments to be reimbursed.
Of course, this does not apply where deliberate fraud is revealed.
Insurance policies are contracts, and as with any contract, professional advice is advisable.
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