Total Permanent Disability Insurance (TPD) is an important safety net for people who are unable to work due to permanent illnesses or injuries. The insurance provides a lump sum payout to cover medical costs, living expenses, and other financial obligations. However, despite its importance, several things could be improved surrounding TPD insurance that could lead to confusion or missed opportunities. In New Zealand, these myths often prevent individuals from understanding the true value of TPD coverage. Let's dive into the five most common myths about TPD insurance in New Zealand and clear them up.
1. Myth: TPD Insurance Only Covers Accidents
Many people in New Zealand believe that TPD insurance only applies to injuries sustained in accidents, such as a car crash or a fall at work. This is a widespread misunderstanding, and it often leads individuals to overlook the importance of TPD insurance if they don’t work in high-risk environments.
- Debunked: TPD insurance covers both accidents and illnesses that lead to permanent disability. Whether you experience a serious injury or are diagnosed with an illness. These include stroke, multiple sclerosis or cancer; TPD insurance can provide crucial financial support if you can no longer work due to the disability.
- Example: If a person develops cancer and their treatment prevents them from returning to their job, they can still claim TPD insurance. It's not limited to physical accidents—illnesses can also trigger a payout.
2. Myth: You Must Be Completely Incapacitated to Make a Claim
Another common myth is that you must be fully incapacitated, unable to move or function at all, to qualify for TPD insurance. Many people think they need to be in a wheelchair or bedridden to be eligible for a claim.
- Debunked: TPD insurance definitions of "total permanent disability" vary, but generally, it refers to your inability to perform your normal occupation or any other occupation suitable to your qualifications, training, and experience. You don’t need to be completely bedridden or unable to perform any tasks to be considered "totally disabled."
- Example: If you suffer a back injury that prevents you from continuing your previous job, but you’re still able to perform less physically demanding tasks, you might still qualify for TPD insurance if your condition permanently impacts your ability to work in your current or any other occupation.
3. Myth: TPD Insurance is Only for People with High-Risk Jobs
There’s a widespread belief that TPD insurance is only for people who work in dangerous, high-risk jobs, such as construction, mining, or manufacturing. Many assume that office workers, teachers, and those in less physically demanding jobs don’t need TPD coverage.
- Debunked: TPD insurance is valuable for anyone—regardless of their job type. Illnesses like cancer, heart disease, or neurological conditions can affect anyone, regardless of their job. Even office workers and teachers are vulnerable to life-changing health conditions that may permanently disable them.
- Example: A teacher may suffer a severe stroke that prevents them from returning to work. The same goes for an office worker who develops a serious chronic illness. TPD insurance can be just as important for them as it is for someone in a high-risk occupation.
4. Myth: TPD Insurance Payouts Are Too Small to Be Helpful
Some individuals avoid purchasing TPD insurance because they believe the payouts are minimal and wouldn’t provide sufficient financial support in case of disability. They may assume that the coverage won’t be enough to replace lost income and cover living expenses.
- Debunked: While concerns about insufficient payouts may arise, TPD insurance payouts are typically determined through a detailed needs analysis conducted by advisors. This process ensures that the sum insured is tailored to your financial circumstances and future requirements, providing a payout that is substantial enough to address the financial challenges of a permanent disability. TPD policies generally provide a lump-sum payment, which can be used for various expenses, such as medical bills, mortgage payments, and daily living costs.
- Example: If you are unable to work due to a disability, your TPD insurance payout can cover living expenses, medical costs, and lifestyle adjustments. By working with an advisor, you can ensure the coverage is designed to meet your specific needs, offering financial security and minimizing stress during challenging times.
5. Myth: You Can't Claim TPD Insurance If You Have Other Insurance
Many people assume that if they already have income protection or other types of insurance, such as critical illness insurance, they won’t be able to claim TPD insurance. They may believe that TPD insurance is redundant if they have other forms of coverage.
- Debunked: TPD insurance can work alongside other policies like income protection and critical illness insurance. These types of insurance serve different purposes. Income protection provides a monthly benefit to replace lost income. At the same time, you’re temporarily unable to work, whereas TPD insurance provides a lump-sum payment for permanent disability. You can claim both if you qualify.
- Example: If you have income protection insurance and become permanently disabled, you may keep receiving monthly payments for a while. At the same time, you could file a TPD claim and receive a lump-sum payout, which can be used to cover long-term expenses, medical costs, and modifications to your living situation.
6. Myth: TPD Insurance Isn’t Necessary Because It’s Unlikely to Happen
Some individuals believe that Total Permanent Disability Insurance (TPD insurance) isn’t worth having because the chances of becoming permanently disabled are low. This misconception leads people to think they don’t need this coverage.
Debunked: While the likelihood of experiencing a permanent disability might seem small, the consequences of such an event can be financially devastating. TPD insurance provides critical financial support when it’s needed most, helping to cover medical expenses, living costs, and other obligations. The impact of a permanent disability can be life-altering, and having TPD insurance ensures you’re prepared for the unexpected, no matter how unlikely it seems.
Example: Even if the chances of becoming permanently disabled are low, unexpected health conditions or accidents can occur. For instance, an unforeseen illness could prevent someone from working permanently, and TPD insurance would provide a lump-sum payout to help manage their financial responsibilities and maintain their quality of life.
Conclusion
Total Permanent Disability Insurance (TPD) is a crucial part of any comprehensive financial safety net. However, many myths and misconceptions about TPD insurance can prevent individuals from fully understanding its importance. By debunking these five common myths—such as the idea that TPD insurance only covers accidents or that you must be completely incapacitated to make a claim—we hope to provide a clearer picture of how this insurance can protect you and your family if life takes an unexpected turn. Whether you work in a high-risk industry or an office job, TPD insurance is valuable for everyone who wants to ensure they are financially secure in the event of a permanent disability.
Contact us today for TPD insurance or mail us at: hello@nzinsurances.co.nz
Frequently Asked Questions (FAQs)
Q1: Can I claim TPD insurance for a mental health condition?
Yes, many TPD policies cover mental health conditions like depression, anxiety, or PTSD if they stop you from working permanently. Check your policy for details.
Q2: What’s the difference between TPD insurance and income protection?
Income protection gives you monthly payments if you're temporarily unable to work. TPD insurance provides a lump sum if you're permanently disabled and can't work.
Q3: Can I have both TPD insurance and critical illness insurance?
TPD and critical illness insurance can work together. Critical illness gives a lump sum for certain illnesses. At the same time, TPD pays a lump sum if you’re permanently unable to work.
Q4: How much can I expect to receive from a TPD insurance payout?
The payout amount depends on your policy, but it can be enough to cover living expenses, medical bills, and other costs. Always check your policy for details.
Q5: Is TPD insurance expensive?
The cost of TPD insurance varies depending on factors like age, occupation, health, and the level of coverage. While premiums can be an additional expense, the peace of mind it offers is invaluable, especially considering the financial security it provides in case of permanent disability.
