Deciding how much Total and Permanent Disability (‘TPD’) insurance you need can be challenging, and it is a question likely to be asked by working Australians concerned about how best to protect themselves, and their families, from financial fallout following a diagnosis of a serious injury or condition. The amount of coverage you require depends on your specific circumstances, including financial responsibilities, liabilities, dependants, and future goals.
What Is TPD Insurance?
TPD insurance provides for a significant lump-sum payment if you become permanently disabled and are unable to return to suitable work. Most working Australians will have a default level TPD insurance through their superannuation fund/s. However, depending on a claimant’s age and default coverage, injured people can be left with inadequate coverage in the event that they are unable to work.
Underinsurance in Australia
ASIC’s Default insurance in superannuation: Member value for money report estimated that 86% of Australians with TPD insurance through their superannuation are receiving an insufficient default level of coverage. Many Australians are in fact unaware that they have this type of insurance, or that they are paying premiums for it.
Underinsurance is when your insurance coverage is insufficient to enable you to meet your basic needs and requirements. Underinsurance is common, as most hard-working Australians are receiving a default level (bare minimum) of insurance cover through their superannuation fund. Underinsurance can result in severe financial hardship if you are injured/impaired to such a degree that you are unable return to suitable work.
How much TPD insurance do I need?
There is no one-size-fits-all approach. It is always best to obtain financial advice tailored to your specific needs and circumstances.
In the Australia’s Life Underinsurance Gap: Research Report released by the Financial Services Counsel, it is suggested, for an average 40-year-old, with a spouse and dependant/s, that they consider having coverage of up to 10x their annual salary.
Individual needs will vary, and it is essential that you consult with a financial advisor, to ensure that you have coverage that is appropriate for your specific circumstances.
Regularly Reviewing Your Coverage
Your circumstances change throughout your lifetime, and so should your insurance coverage. Review your TPD insurance regularly, especially after major life events such as marriage, buying a house, having children, or where there is a significant change in income.
Conclusion
Selecting the right amount of TPD insurance is a personal decision which necessitates careful consideration of your specific circumstances. Regularly reviewing your policy, and speaking with a financial advisor, can provide peace of mind.
If you, or someone you know, is unable to work due to an injury or illness, we would be pleased to meet with you to discuss your legal options on a no-win, no-fee basis. Please contact our friendly team on (02) 4050 0330 to make an appointment with one of our specialist personal injury solicitors.
DISCLAIMER
This article reflects the current law at the time of publication. It is intended for informational purposes only and does not constitute legal advice. The actual decisions in each case are summarised for general understanding. For specific legal guidance in relation to your situation, please consult with a qualified legal professional.
