What you need to know about TPD / Superannuation claims.
What does TPD mean?
TPD stands for total and permanent disability. A TPD insurance policy usually provides for a lump sum payment if you can’t work in your usual occupation or any other occupation you’re suited to (based on your education, training or experience) due to the severity of an injury or illness.
About TPD insurance
What is considered a total and permanent disability?
Different insurance policies have different definitions of total and permanent disability. But as a general rule, if you’ve been unable to work due to an injury or illness for an extended period (usually more than three months) with no expectation to return to work, then you may satisfy the definition of TPD that applies to your policy.
How does TPD insurance work?
Most superannuation funds arrange TPD insurance for their members and this insurance provides a lump sum payment if you’re unable to work due to an injury or illness.
If your TPD insurance claim is approved, the lump sum is usually paid into your superannuation account, giving you the choice to:
- Withdraw the entire balance
- Make a partial withdrawal and leave the balance in super
- Leave the entire balance in your super
What is covered by TPD?
The definition of TPD varies between policies – for example, your policy might cover you for:
- Being unlikely to be able to return to work in your occupation
- Being unlikely to be able to return to work in any occupation
The general definition of TPD insurance, that’s relevant to most policies attached to superannuation memberships, requires you show that you’ve been unable to work for more than three months due to your injury or illness and that you’re unlikely to return to work in your usual job or any other work that fits your education, training or previous work experience. With some TPD policies, you don’t necessarily have to be unfit for all work to make a claim.
Does TPD cover cancer?
A cancer patient may be able to make a claim on their TPD policy if their illness is serious or long term and prevents them from working. TPD insurance covers injury and illness and cancer is no exception. If your ability to work is hampered due to cancer (or some other medical condition) you should consider whether you might be eligible to claim TPD.
What’s the difference between trauma and TPD insurance?
The main difference between trauma insurance and TPD insurance is that trauma insurance will pay you for the specified illnesses while you’re transitioning back to work, while TPD insurance doesn’t pay you unless you’re unlikely to ever go back to work. In other words, trauma insurance funds the costs associated with getting you better and back to work. But if your accident or illness is so severe that you can never return to work, TPD Insurance provides you with a lump sum benefit.
Is permanent disability for life?
Permanent disability refers to the fact that the person is unlikely to return to work. However, under most TPD insurance policies, permanent disability refers specifically to the inability to work in your usual occupation or any other occupation you’re suited to, based on your education, training or experience. So claiming a TPD lump sum doesn’t necessarily prevent you from working altogether. In the unlikely event that you’re able to find employment after your claim is successful you won’t be required to pay the claim back.
Superannuation TPD cover
What is TPD superannuation?
Many superannuation policies include TPD insurance. So if you’re making a claim for TPD through your super fund, you’re not necessarily drawing on your super – you’re making a claim on your TPD insurance policy, and you have the option to leave your super untouched.
How can I tell if I have TPD insurance?
Your superannuation member statement should provide details about any insurances that are connected to your membership. If you have multiple superannuation accounts, then it’s possible you have multiple TPD policies as well, and if that’s the case you may be eligible to make multiple claims.
If you’re unsure about the insurance you have connected to your superannuation funds, you could call a specialist TPD solicitor who may be able to check on your behalf. Some law firms offer this as a free service.
Making a TPD claim
What’s a TPD claim?
A TPD claim is a claim for a lump sum payment under a Total and Permanent Disability insurance policy. Most Australians have a TPD insurance policy connected to their superannuation fund, however some people take out separate TPD policies. When you make a TPD claim you’re claiming a lump sum insurance that’s in addition to your superannuation fund balance.
||If your claim for TPD is approved, you’ll generally be given the option to then withdraw this lump sum from your superannuation account together with your existing superannuation account balance.|
Do I have a TPD claim?
If you’ve been off work for three or more months due to injury or illness, with no prospect of returning to work, then it’s possible that you’re eligible to make a TPD claim. However different policies have different provisions and definitions, so you’ll need to check your policy to find out if you qualify to make a claim.
||A specialist TPD lawyer will be able to look at your superannuation fund (or funds) and advise you about your TPD entitlements. Some law firms will provide initial advice at no cost, so it’s worth calling to get legal advice before you make a claim.|
How do I make a successful TPD / super claim?
To make a claim you’ll need to contact your superannuation fund, and they will typically ask you to complete a number of forms. After an initial assessment, the super fund with pass your claim onto the insurer to do an assessment. The insurer will then make a decision about whether to approve or deny your claim.
The key to a successful TPD claim is completing the application thoroughly and providing all the necessary documents, such as medical records or workers compensation files, to substantiate your claim. However, since most people have never lodged a TPD claim before, they’re in a position where they’re simply responding to ad-hoc requests from the superannuation provider or the insurer, which can be a lengthy and frustrating process. If you make even one error during this process it can jeopardise the success of your claim.
||Many people use a specialist TPD solicitor to manage their claim on their behalf, to give themselves the best possible chance of success. Most TPD lawyers will handle your claim on a no win no fee basis, so you only need to pay the legal fees after you receive your lump sum payment.|
How long do TPD claims take?
Generally speaking, it takes 6-12 months for a TPD claim to be finalised.
Insurance companies undertake to complete their assessment of a TPD claim within six months. Some straightforward claims are finalised more quickly than this – however in more complicated claims the insurance company will often take longer than six months to make a decision.
Once the insurance company has made their decision in relation to a TPD claim, the trustee of the relevant superannuation fund must undertake their own separate assessment of the claim. This process usually takes one to two months.
Can you claim TPD more than once?
If you have more than one TPD policy, you may be able to make multiple TPD claims – one for each policy. This is quite a common situation, as many people have multiple superannuation funds as a result of changing jobs over the years, and may have a TPD policy through each fund. Making a successful claim against one policy has no effect on any other TPD insurance you may have, but you’ll need to submit a separate claim against each policy.
TPD lump sum payouts
How much is a TPD payout?
TPD lump sums typically range between $60,000 and $300,000. Your insured benefit amount will be clearly identified on your superannuation member statement. If you have multiple superannuation accounts with TPD insurance connected to your memberships, you may be able to make multiple lump sum claims.
Is a TPD payout considered taxable income?
A TPD payout is not considered taxable income, however if you withdraw part or all of your TPD payout from your super fund as a lump sum, you’ll need to pay “superannuation lump sum withdrawal tax”. The calculation is different for everyone, and if you have multiple super funds, the calculation will be different for each fund you make a withdrawal from.
- There’s no tax payable if you are aged 60 or over.
- If you’re under 60, the amount of tax you’ll pay depends on your age and your “eligible service date” (this is usually the date you became a member of your superannuation fund).
- If you haven’t reached your preservation age, then a portion of the withdrawal amount will be tax free, and the taxable portion will be taxed at 22%.
- If you have reached your preservation age (but are not yet aged 60), you can withdraw up to $200,000 tax free.
- If you withdraw more than this amount, a portion of the further withdrawal amount will be tax free, and the taxable portion will be taxed at 22%.
Does TPD payout affect Centrelink?
A successful TPD claim has no impact on your Centrelink or other benefits (such as child support payments), because the TPD benefit is paid into your superannuation account. Superannuation is excluded from Centrelink means testing until you reach the Centrelink Age Pension age, which is between 65.5 and 67.
However, if you withdraw your TPD (or existing superannuation) balance, it may impact your Centrelink entitlements. Different Centrelink benefits are means tested in different ways, so it’s a good idea to get professional advice on your entitlements before you access your TPD benefit and/or superannuation account balance.