What's the difference between income protection and TPD insurance?

Many people have both Total and Permanent Disability (TPD) insurance AND income protection cover.  Often both policies are secured at the same time.

What is TPD?

TPD insurance generally provides a lump sum benefit if it becomes unlikely that you will ever work again in either your own or any occupation.

What is income protection?

Income protection is usually a monthly benefit (often up to 75% of your regular income) paid while you are unable to work once any waiting period has been reached (usually 30 to 90 days).  This is sometimes referred to as salary continuance cover.

Can I have both?

Yes.  Usually those with TPD cover will have income protection cover, although people sometimes secure stand-alone income protection policies.

We often see people mistakenly believe that they cannot claim a TPD benefit while they are being paid income protection or similar benefits.

That is not the case.

Most of the time it is possible to claim a TPD benefit while receiving income protection or salary continuance payments without the TPD benefit impacting upon those ongoing payments. 

There are however some exceptions. 

Certain funds do have policies that will cease your income protection entitlement upon the payment of a TPD benefit.  We have even seen instances of insurers opting to pay a TPD benefit purely to bring about the end of an income protection claim.  Sometimes this is allowed by the policy, but not always.

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.

We recommend that you seek legal advice about these issues prior to lodging a claim (not after).

If you require further advice feel free to get in touch with the writer, Michael Pannach.