Life and Total & Permanent Disability (TPD)

If you have a spouse, children or others who are financially dependent upon you, or you run the household, who will pay the bills or help look after the children if you're no longer around?

Life Insurance can help by paying a cash lump sum if you die. The lump sum is generally not taxable* and is payable to your estate or, alternatively, to the beneficiaries you list in your policy, and can be used for any purpose.


Term Life Insurance – Definition

Term life insurance pays a lump sum benefit on the death of the life insured, during the term of the insurance. It is probably the most economical form of protection for your family in the event of your death.

Purpose of Life Insurance

Provides the ability to repay debts

  • To cover capital gains tax liabilities
  • To cover dependants from the loss of the major income provider
  • To secure a business

Target market

  • The main provider of the family’s income
  • Families with dependants
  • Key people within a business

How much cover should you have?

The calculation of sum insured is an individual issue and varies accordingly. It will depend on the stage you are at in life. Whether you are single or married, whether you have debt and how much, whether you have a spouse and children who need financial provision made for them, whether you have a disabled child or other beneficiary who may need special needs and particular sums of money ongoing, etc.

The more financial obligations, the more children you have, the more assets requiring protection, previous marriage obligations, bank guarantees, mortgages, growing children’s needs such as university education, sporting costs, new vehicle costs, reasonable lifestyle costs ... the more life insurance that is needed.


Total and Permanent Disablement (TPD)

Unfortunately, accidents do happen. And while you may survive, what if you can never work again?

If an accident or illness leaves you unable to earn an income in the future, TPD Insurance will pay you a lump sum to help relieve the financial pressure. It can also be useful for people who are not in the workforce and are unable to take out Income Protection Insurance.

Definition

Total and Permanent Disablement is normally an optional extra cover on a life policy. It aims to provide a lump sum of money should a person suffer an illness or injury which totally and permanently incapacitates them from working.

Own Occupation

Payable by reason of accident or injury as to render you likely never again to be engaged in your own occupation. (Definition may vary from company to company. Please refer to their Product Disclosure Statement).

Any Occupation

Payable by reason of accident or injury as to render you likely never again to be engaged in any gainful business, profession or occupation for which you are reasonably suited by your education, training or experience. (Definition may vary from company to company. Please refer to their Product Disclosure Statement).

Purpose

The function of Total and Permanent Disablement is to:

  • Cover the mortgage or pay other debts
  • Protect business against loss of sales and profits
  • Maintain business lines of credit
  • To provide an income stream
  • To provide money for home modification

Benefits

If a TPD benefit is paid from a non-superannuation policy the proceeds are generally tax free unless the policy was taken out for key person purposes. If the benefit is paid from a superannuation fund then it will be classed as an ETP with a portion of the benefit being classed as a post-June 1994 invalidity component.

Target Market

  • Younger people who would wish to maintain their independence
  • Those with no income protection insurance
  • Those with dependants
  • Business partners
  • Businesses with key employees

How much cover should you have?

You should consider mortgage or rent, other loans and debts, credit cards, school fees and expenses, living expenses such as food, clothing and bills. You should also allow for medical expenses or any home modifications.

If an accident or illness leaves you unable to earn an income in the future, TPD Insurance will pay you a lump sum to help relieve the financial pressure. It can also be useful for people who are not in the workforce and are unable to take out Income Protection Insurance.

 

* Tax may be payable on certain life insurance benefits, for example, where the life insurance was taken out for business purposes or certain payments from superannuation funds. You should discuss your specific taxation circumstances with your accountant or taxation adviser.

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Arrowsmith & Petruccelli Financial Services Pty Ltd is a corporate authorised representatives licensed through Millennium3 Financial Services Pty Ltd. Millennium3 Financial Services Pty Ltd is a Principal Member of the Financial Planning Association. Millennium3 Financial Services Pty Ltd (ABN 61 094 529 987) is a Australian Financial Service Licensee. AFSL Licence No: 244252. For more information relating to this arrangement please click here

 


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