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accounting exemption

Product Class Advice – Total and Permanent Disability (TPD) (Part 4)

The benefit is a lump sum paid if you become Totally and Permanently Disabled. This form of insurance is usually available as an optional benefit on a Term Life or Trauma policy. You must be disabled to such an extent that you are unlikely to ever engage in either: your own occupation OR any occupation.

The first definition is by far a more beneficial policy to be assessed under; however it is likely to be the most expensive and only available to selected occupations. The second definition is much more restrictive in that it includes ‘any occupation’ to which you may have been suited by education, training and/or experience. When considering TPD cover the definition of “own” and “any” occupation used by the product should be considered in your personal circumstances. Eligibility and cost of TPD insurance is also contingent upon your specific occupation.

If TPD insurance is owned inside an SMSF then it is only possible to have an “any occupation” definition.

Many of the features of Term Life Insurance will apply equally to TPD. The sum insured is payable in the event of TPD and is generally restricted to being no more than the death benefit. The lump sum could be used to help pay for debt reduction, income generation and the inherent costs of permanent disablement.

It is common for advisers to recommend a level of cover within superannuation which would be subject to the “any occupation” definition and a sum covered outside of superannuation where the “own occupation” definition is utilized – this is a standard requirement for professionals.

Generally term, TPD and trauma insurance premiums are not tax deductible. However, when a claim is paid the benefits are not subject to tax.

Should you wish to obtain further information about our RG146 face-to-face course, our solution for accountants once the accountant exemption expires or you wish to become an authorised representative please email info@fwgs.net.au or register your interest on our website.

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