Income protection and TPD insurance both compensate you if you are unable to work due to an injury or sickness. Nevertheless, there is a key distinction between TPD and income protection: TPD only pays out if you become permanently incapacitated and are unable to work again. It is not intended to cover you if you are just temporarily unable to work; that is what income protection is for. In this post, we will discuss in detail TPD vs Income protection and which choice is ideal for you, based on your specific circumstances.

What is income protection?

Income protection benefits, also known as salary continuation benefits, are insurance payments provided to a sick or injured individual each month when they are unable to work. Payments are made until the individual is able to return to work or until the end of the benefit term, which can be 2 years, 5 years, or until the person reaches the age of 60, 65, or 70.

What is TPD?

Total and Permanent Disability (TPD) benefits are insurance benefits provided to an ill or injured individual if they meet the following criteria:

  • stop working due to illness or injury; 
  • do not work during the waiting time (which is normally three or six months); 
  • After this period, they will be unable or unlikely to return to the job within their education, training, or experience.

Work incapacity must sometimes include work that a person may be retrained to accomplish.

The definition of TPD claims varies per policy, and the above is only a synopsis of a work-based TPD definition. Every policy definition will be unique.

A summary of income protection

If you have income protection insurance and intend to make a claim, you must provide the following information in order to get a benefit:

  • That you stop working due to an injury or sickness; 
  • That you are unable to work for the applicable waiting time (typically 30, 60, or 90 days); 
  • That your doctor supports your inability to work. Typically, you must produce monthly paperwork filed by your doctor certifying your inability to work.

Disability Income protection insurance benefits are given out on a monthly basis and are determined based on your wages before you stopped working (pre-disability income).

People are usually awarded a benefit that is 75-85% of what they were earning before being compelled to stop working. (Please keep in mind that policy criteria for real income protection insurance vary, and the foregoing is only a summary.)

Some income protection insurance pays superannuation payments while others do not. In this aspect, each individual policy is unique. You can contact WKB lawyers and consult with one of our skilled and professional insurance lawyers for further information on your income protection benefits.

An overview of Total and Permanent Disability (TPD).

As previously stated, TPD is a lump sum payment made if you are deemed unable to work again (or in some other circumstances).

It should be noted that not all TPD payments are the same. TPD Assist benefits through Australian Retirement Trust are given in a succession of lump-sum payments over a period of years, providing the claimant remains unable to work.

Other super plans do not pay lump sum rewards, but instead, offer lifelong pensions as an alternative. You can consult our expert TPD lawyers before obtaining or claiming TPD insurance. We will assist and advise you during the process, as well as explain the benefits available via your superannuation claims.

Can I get income protection as well as TPD?

Yes. If you have income protection, you may normally claim both, and the claims do not usually conflict.

Some people believe they cannot receive TPD payments if they are receiving income protection or other comparable benefits, which is incorrect. Most individuals put off filing a TPD claim for years because they believe it would stop their eligibility for income protection or similar benefits.

Most of the time, individuals can apply and be awarded a TPD benefit while still receiving income protection or salary continuation benefits. The TPD payment does not affect their continued income protection entitlement. There are, however, certain exceptions.

Payments that terminate after a TPD benefit is paid are usually “temporary,” such as Temporary Salary Continuance benefits.

When the payment of a TPD benefit terminates a person’s right to income protection or a similar benefit, the insurer may elect to pay the TPD (even if it has not been claimed) so that the claimant does not have to pay as much income protection money. When a person does not fulfil the insurance requirements, the decision to pay out a TPD payment can be contested.

TPD insurance and income protection termination of employment claims

Income protection and TPD insurance benefits are typically available even after your work has been terminated. However, some superannuation funds/insurers require you to continue working to make a claim or submit a claim within a specific length of time after you stop working (i.e. two years for example).

If you are considering filing income protection or TPD claim, we urge that you obtain guidance before quitting your position.

Having said that, if you have already left your work and want to claim payments, you should still contact us and seek advice on whether your eligibility to claim has been damaged by the loss of employment.

What if my TPD claim ends my right to income protection?

If you are entitled to both TPD and income protection payments, claiming TPD may result in the loss of your income protection or equivalent benefits. We urge that you contact us for sound advice before filing any claim if you are entitled to both TPD and income protection payments.

Looking for further guidance or support after reading this article? Please contact our legal specialists, who can assist you with any questions you may have.