by Russell Hutchinson
However, as Covid-19 and ongoing bad news on claims has prompted insurers to set tougher entry requirements for some categories of income protection the product may be worth a second look.
In Australia, TPD has been a consistent presence on the insurance scene partly because it has been an easy way to incorporate some disablement cover into the insurance sold with superannuation plans in that market.
It has also been widely claimed on, leading to concerns about sustainability in that market, as insurers have grappled with claims rising sharply from two causes: an increase in mental health causes of total disability and more aggressive pursuit of claims by clients of claims
management companies.
The claim process issue is one reason why TPD has become less popular in New Zealand.
Some advisers have found it very hard to get a TPD claim through the work testing required to evidence that disability is both total and permanent.
Clients easily become discouraged without the support of advisers that can make a fair assessment of whether the process is likely to succeed.
This is another good example of where advice – and especially experienced advisers with prior successful TPD claims – can be critical to the client experience of the product.
Assuming that you buy the concept of TPD’s role in risk plans and accept that although hard, claims do get paid, then TPD is definitely worth a second look - more so because not all TPD products are created equal.
The main benefit definition for own-occupation TPD is fairly close to standard. One bank provider has a slightly tougher definition but all the main adviser-focused insurers offer essentially the same main definition wording.
Partial wordings are similarly close in effect but limits on amounts are where differences – sometimes large ones – are to be found.
One bank insurer offers a partial benefit just one-quarter of the size of more adviser-insurers, this is why it is essential to look beyond mere claim payment definitions to check out the amount paid in different partial disability situations.
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