29
Jan

Do Doctors Need TPD and Life Insurance ?

Doctors commonly purchase many types of insurance covers that protect them from various financial risks. Two of the types commonly considered include Life and TPD insurance.

What is life insurance ?

Life Insurance is designed to generally pay a lump sum if you, as an insured person, were to die.  It may be referred to as death insurance, but this is not common given its negative connotations.

What is TPD insurance ?

TPD insurance – which is an acronym for Total and Permanent Disability insurance – is generally designed to pay a lump sum if you’re totally and permanently disabled (and never expect to work again because of an illness or injury) as defined by an insurer.  TPD insurance is commonly issued by Life Insurance companies and so is known as a type of Life Insurance.

How do you know if you need Life and/or TPD cover and if so, how much of each ?

You may be a Doctor that has a high level of financial literacy and has researched these products yourself. And you may take a view that you can work this out yourself.

But many Doctors are time poor and cannot do extensive research on their own and need the help of a professional in this field.  A life insurance adviser, like those at Experien Insurance Services, can offer this professional service via what is referred to as Personal Financial Advice.  We can undertake a process to work out your needs, goals and circumstances and then use this data to recommend a suitable level of cover, if any, for these insurance categories.

Your needs will change over time so the cover you have, or don’t have, should be regularly reviewed.

Some Doctors will join a superannuation fund that automatically gives them a set level of life and/or TPD cover without considering if this is suitable for the person.  If this applies to you, then you should consider reviewing this further.

How does life insurance and TPD insurance differ ?

The answer to this question will differ based on how you acquire the cover. Many professionals, such as Doctors and Dentists, will use a Financial Adviser/Broker in this regard, given their unique circumstances and the commentary below is based on general features found in products arranged in this way.

Life Insurance (Death Cover)

A standard feature is that this cover usually pays an amount if the insured person were to die.  But there can be many other features added to the cover. For example, a payment may be made earlier if the insured has been diagnosed with a terminal illness and doesn’t have long to live. This can help with final expenses and estate management. Some insurers offer a Financial Planning Benefit that pays an extra amount following death to fund the costs of preparing a professional financial plan for your loved ones. And another option could be the ability to increase your cover, even if your health status has deteriorated, based on the occurrence of certain events at a later time, like having a child.

A common exclusion for life cover is suicide if this happens in the first 13 months of the policy duration.

TPD Cover

This feature commonly pays a lump sum if, as a result of illness or injury, the Life Insured has been absent from work and unable to work for a number of months (eg 3 or 6 months as defined) and after that period of time is expected to remain that way permanently.

There are many differ types of TPD cover and one of the important differences is how the “permanence” of the illness or injury is measured. For example, you may be measured against only your ability to do your own occupation. And if you can’t do you own occupation then you will be paid a claim.  But, another type may measure you against any possible wider occupation that may be suitable for you. The claim may not then be paid if you can’t do your own occupation but could do another suitable occupation. Care is needed in choosing which type of TPD cover could be important to you.

A common exclusion for TPD cover is self-inflicted injuries at any time during the policy duration.

Some pre-existing health conditions, at the time you apply for cover, may pose a greater risk to the insurer for a TPD claim and not as much as for a Death claim. So an insurer may apply a premium loading and/or a cover exclusion for TPD and a lower or no loading/exclusion for Death cover.

Linkages

Life cover may be purchased without TPD cover and vice versa. Or they can be purchased together. When purchased together, a claim could be paid on the one cover type and this will then reduce the remaining cover on the other type. For example, someone may buy $1m of life cover and a linked amount of $700k of TPD cover under the same policy. Suppose a person suffers from an illness that leads to permanent disability.  They could then be paid $700k from the policy and then the policy could continue with only life cover of $300k.  If the person then dies at a later date, the remaining $300k could be paid on death.  Some policies have different variants of this feature where, for example, the life cover may be able to be reinstated in full, should a linked TPD claim be paid.

Other considerations

The products issued by life insurers offer a great deal of flexibility in coverage and there are many features and options to consider with a financial adviser.  For example :

  1. Who the policyholder should be
  2. Whether to structure the cover to be associated with a superannuation ownership structure or not
  3. How to pay the premiums (eg directly from your bank balance or from other superannuation savings)
  4. What other product options should be considered
  5. At what ages the cover may expire (eg TPD cover may cease at age 65 but life cover could continue for longer)

Want to find out more ?

The information provided above contains general information and limited examples and does not take into account your personal objectives, financial situation or needs. Note that the policy wording will differ from insurer to insurer and loadings, exclusions and other limitations may apply by the insurer to each applicant on a case by case basis.

At the time of writing, Life insurance and Financial Advice services are provided by Experien Insurance Services Pty Ltd (EIS) ABN 99 128 678 937 and Experien Financial Services Pty Ltd (EFS) ABN 32 631 346 757. EIS and EFS are a Corporate Authorised Representative (No. 320626 and No. 1274354) Count Financial Limited ABN 19 001 974 625, AFSL 227232. See our website for our Financial Services Guide and latest AFSL arrangements.  Always read the Product Disclosure Statement issued by an Insurer before considering insurance.  To find out more about the services of Experien Insurance Services and to arrange a complimentary initial consultation at no additional cost, contact us via the link below :

29 January 2025