Total Permanent Disablement (TPD) Insurance

Anyone can be hit by an illness or injury that leaves them with a permanent disability. If this happens to you or your loved one, are you prepared for the financial consequences?

Consider these statistics.

• More than 94,000 working-age individuals are currently receiving supported living payments as a result of a disability, injury, or medical condition that restricts their capacity to work long-term.
• Unemployment figures for disabled individuals aged 15-64 are almost twice as high as for same aged non-disabled people. Disabled individuals also tend to earn lower wages and have poor job security.
• Each year, around 10,000 New Zealanders suffer from a stroke that can cause significant disability.
• About a third of stroke survivors are younger than 65 years old.
• One-third of stroke survivors need daily assistance with everyday tasks.

A total permanent disability (TPD) cover can provide financial support as you navigate the challenging and painful transition to living with a disability. So, what are the benefits of TPD? How do you calculate the cover you need? And where can you find the answers to the most frequently asked questions about TPD insurance.

What is total permanent disablement (TPD) insurance? Do I really need it?

Total permanent disability insurance or total disablement cover provides a non-taxable lump sum amount if a total and permanent disability prevents you from going back to your occupation. Your occupation can be:

• Your work or business
• Being a student, or
• Performing unpaid household or family duties.

A permanent disability can badly affect your earning capacity and potential for advancement in your career. It also increases your living expenses, further hurting your finances.

TPD insurance is designed to soften the financial impact of a permanent disability on you and your loved ones. It also includes benefits aimed at reducing your stress and helping you adjust to your new circumstances.

Your lump sum benefit is yours to spend as you see fit. You can use it to:

• Pay for private healthcare and medications

New Zealand’s public healthcare system covers treatment for chronic conditions. But each year, thousands of patients face lengthy waiting lists to see a specialist, have vital diagnostic tests, or get treatment at public hospitals.

While private medical care is available, it isn’t cheap. If you don’t have health insurance, you can use your TPD cover to pay for private healthcare. You can also use your benefit to cover the cost of rehabilitation as well as transportation and accommodation if you need to travel for treatment.

Several insurers also provide psychiatrist or psychologist counselling benefits to help you and your family cope with major life changes.

• Hire a carer or replace the income lost by a family caregiver

Your family may experience additional financial setbacks if your spouse has to take unpaid leave or work reduced hours to care for you. Or you may have to hire a caregiver to help you with daily living activities. If your children are still young, you will need to budget for childcare.

With total permanent disablement insurance, you can use your benefit to replace your family caregiver’s lost income or to pay for other types of assistance you and your family need.

• Cover household expenses like rent, food, electricity, transportation, communication, and water bills

New Zealand is not a cheap place to live. Typical monthly living costs range from $3,000 to $6,000 for those living alone and $5,000-$6,000 for a family of four.

If you are permanently disabled due to an injury or illness, you can use your benefit to cover your living expenses. You won’t have to worry about where you’ll get the money to pay your monthly bills.

• Stay up-to-date on your financial obligations like your mortgage, credit card bills, car loan payments, and insurance premiums

Losing your capacity to work and meet your financial obligations doesn’t just wreck your credit record. You may also face the loss of assets you’ve been building for years. You or your family members may also lose insurance cover just when you need it the most.

Having TPD cover helps shield you from further losses. You can use your benefit to continue paying your loans and secure your assets.

• Make home or vehicle modifications or buy specialised equipment

Your TPD benefit can help cover the cost of equipment and modifications to make your home and vehicle disabled-friendly. You can use it to purchase a wheelchair, communication devices, seating and hand controls for your vehicle, or lifts, handrails, wheelchair ramps, and bathroom modifications for your home.

• Help you transition to a new career

If your disability prompts you to switch to a new occupation, you can use your TPD benefit to enrol in a course or build your own business. This way, you can gradually get back on your feet and be able to support yourself and your loved ones.

What is considered a total or complete disability?

The definition of total permanent disability depends on the type of TPD cover you have.

• Own occupation: You will receive a lump sum benefit if a permanent disability caused by an illness or injury prevents you from going back to your pre-disability occupation.
• Any occupation: You will receive a lump sum benefit if a permanent disability due to an illness or injury prevents you from resuming your pre-disability occupation or any job that’s appropriate for your work experience or education.
• For both own occupation and any occupation TPD cover: You will receive a lump sum benefit if you are diagnosed with a condition that will prevent you from working ever again. Some of these covered conditions include Alzheimer’s disease, dementia, motor neurone disease, multiple sclerosis, Parkinson’s disease, paralysis, major head trauma, and severe rheumatoid arthritis. Check the insurer’s policy for a complete list of these conditions.
• Modified TPD/Non-occupational cover: Some insurers offer this cover for homemakers, stay-at-home parents, and other individuals who are not in paid employment or not eligible for own occupation or any occupation cover.

Depending on the insurer you choose, modified TPD/non-occupational cover will provide a lump sum under the following circumstances:

• Homemakers’ permanent disability prevents them from resuming their full-time household duties
• Loss of limbs
• Blindness
• Permanent cognitive impairment
• Inability to perform at least two activities of daily living without physical support from another person. These activities include bathing, eating and drinking, dressing, ambulation/walking, and toileting.

How much disability insurance cover do I need?

When determining the amount of cover you need, consider how much income you may lose if you are unable to work from now until you retire.

Another way to estimate how much TPD cover you require is to calculate:

• How much money you and your family will need for living expenses, debt payments, other financial commitments, your medical treatment, and for your retirement
• The resources you have (health insurance, trauma insurance, savings, other income sources) that can help cover these expenses.

Calculating the difference between your projected expenses and your financial resources gives you an idea of how much TPD cover you may need. A Policywise adviser can also help you determine how much TPD cover is sufficient for your circumstances.

Who can get total permanent disablement insurance?

You can get TPD insurance whether you have paid or unpaid work. You can apply for cover whether you’re employed, self-employed, a business owner, a student or a homemaker.

Benefits (built-in and optional)

TPD insurance products have built-in and optional benefits specially designed to provide clients with the types of assistance they’ll need in case of a total and permanent disability.

Note that insurance products have different built-in and optional benefits. Download our comparison table to get an overview of TPD products offered by our partner insurers.

Why choose Policywise as your TPD insurance adviser

Get the following when you choose Policywise:

• Personalised TPD quote comparisons: Using some basic details about you, Policywise advisers shortlist TPD products from multiple insurers that fit your needs, priorities, and budget. This process ensures that:

• You’re only comparing TPD products that are most relevant to your situation
• you’re buying only the cover you need and not overpaying for benefits that are not necessary for your circumstances
• you’re getting the best cover for your budget

• Free consultation and advice from insurance experts: Policywise advisers help you determine what cover you need, how TPD insurance fits into your financial plans, and which insurance products can best support those plans.

They can help you:

• Choose the right cover amount
• Understand product benefits and exclusions
• Find ways to get lower premiums
• Get answers to all your questions about TPD insurance. This way, you can feel more confident about your insurance purchase.

And if you need to make a claim, Policywise will go into bat for you. Dealing directly with the insurance company can be challenging and stressful and you may not get the result you were hoping for. We can make the whole process much smoother.