Business & Finance Finance

TPD Insurance Own Occupation - Understand Your Options

Copyright (c) 2014 Kerrie Peacock

TPD insurance own occupation is a policy that covers the insured in the event that he or she becomes disabled or is unable to continue working in his or her current occupation. This means that the insured is not able to perform duties in the profession that he or she has been trained in. People who are specialists in various fields go for own-occupation policies. The main advantage with this policy is that policy holders get the chance to receive a benefit claim. This is because chances of being deemed disabled in your own occupation are much higher than in any occupation.

An example is a surgeon who injures her hand and is no longer able to perform surgeries. Under the definition of 'own occupation', she is entitled to a benefit payout as she can no longer perform in her main occupation. However, under 'any occupation' she is not entitled to a payout because she can still work as a lecturer or even a general practitioner.

TPD Insurance Own Occupation Under Superannuation

When taking out a cover, most people are interested in how much they will foot towards premium payments. Everyone is looking to make a saving and that is why many opt to take out TPD insurance through superannuation because the premiums can be funded through pre-tax contributions or deductible contributions.

Generally, funding through superannuation is more cost effective, but there are certain pitfalls that applicants must be aware of. For starters, before you can qualify to be paid, your disablement must meet the definition laid out under the Superannuation Industry Supervision Act of "any occupation" and "own occupation". It is also worth noting that TPD claims paid as a lump sum under superannuation are liable to tax.

How Much Cover Do I Need?

The general recommendation is that policy holders should strive to take out at least ten times their annual salary. However, needs differ from one family to another and the best approach would be a needs-based approach. Using this basis, you can determine what constitutes adequate cover for your family.

To help calculate how much TPD cover you need, draw up a list of all your financial commitments. This should include ongoing expenses, debts, education expenses, children expenses and bills. You also need to project and consider your future obligations such as higher education for your children. To ensure that you're sufficiently covered, factor in emergency costs such as medical expenses, nursing care, vehicle or home modification costs and rehabilitation costs.

Important Considerations Under TPD Insurance Own Occupation

As evidenced, "own occupation" provides a wider definition and is more lenient in comparison to "any occupation". Generally, this type of cover tends to be more expensive. Insurance companies in a bid to hedge against the risk associated with such covers are placing more stringent measures to applicants of this cover. To qualify under "own occupation", some insurance companies may consider one's medical history and whether the applicant is working in a high-risk field. There are some insurance companies that may employ even tighter measures; it is therefore up to the applicant to conduct a search and assess policy features of various insurers to get the best plan.

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