What is the purpose of TPD?
TPD contracts provide a lump sum payment should you become totally and permanently incapacitated through illness or injury.
Why Do I need TPD Insurance?
We believe the most important requirement is for you to have your income fully covered by Income Protection. However, we do not believe that this alone would be necessarily sufficient to offset the financial impact of you becoming totally and permanently disabled. A lump sum is typically required to:
• Pay for significant costs such as medical expenses and rehabilitation costs.
• Pay for modifications to the home or car to accommodate for disability
• Replace the 25% of your income that is not covered by your income protection insurance policy.
• Replace the superannuation lump sum that would normally accrue over your working life.
Which Definition of TPD Cover is Suitable to My Circumstances?
“Own” occupation TPD is the preferred definition as the criteria to be meet is based on you not being able to perform your own occupation. It provides you with the highest opportunity to make a successful insurance claim. This is reflected in the higher premiums that accompany this form of cover.
Own occupation TPD cover is only available to certain occupation categories.
We highly recommend own occupation TPD when available.
The alternative is “Any: occupation TPD which provides you with a lump sum benefit where you are unable to work for health reasons and medical evidence indicated it is unlikely that you will ever work again (in any occupation) or you suffer a specific loss or are unable to perform certain duties of daily living.
Any occupation TPD can be owned under superannuation allowing premiums to be funded by pre-tax contributions/tax deductible.
What level of TPD cover is appropriate?
We believe that the ideal situation in most cases would be, to be left with your home, personal effects and existing investment assets, debt free.
A TPD benefit paid to you individually is a tax free lump sum. You will pay tax on the investment earnings generated by this lump sum at your marginal rate of tax.
Often you may also choose to contribute some of the lump sum to superannuation to minimise your tax payable.
If you want to know more contact a Specialist SMSF Solutions adviser today, on 02 4942 0280.