Our legal guide to TPD payouts through a super fund can help you understand the TPD claim process when a total and permanent disability prevents you from working in your usual occupation. In this situation, it’s helpful to know the TPD benefit contained in a total permanent disability insurance policy.
A lump sum TPD payout can help cover medical expenses when you can’t work. Our TPD Payout Guide explains what you need to prove for a successful TPD claim and whether you will pay tax.
Claiming a Lump Sum TPD Payout Through a Superannuation Fund
You could claim a TPD payout through a super fund when an injury or illness prevents you from working again. Your disabling medical issue could be a physical injury, psychological disorder, chronic illness, or other medical concern.
In Australia, many people don’t know:
- They have permanent disability insurance coverage through a super fund
- The eligibility requirements for a successful TPD insurance claim
- The TPD definition that applies to a permanent disability TPD insurance benefit.
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Defining Superannuation Insurance Payouts
We begin by defining a superannuation insurance payout. In general, all Australian employers must contribute to their employees’ superannuation funds to help them have a comfortable retirement.
Australian super funds do more than provide retirement income; they also offer financial security by including disability-related insurance policies, such as:
• TPD cover
• Income protection
• Death cover
• Terminal illness cover
• And life cover
You could be eligible to claim against at least one of these policies when an accident or illness prevents you from working in your regular job. When you satisfy policy terms and conditions, you could receive a lump sum payment for a TPD benefit or regular monthly payments for a temporary disability. Furthermore, people with multiple TPD insurance policies could be eligible for multiple TPD payouts.
What is Total and Permanent Disability (TPD) Insurance?
TPD insurance is a type of insurance that offers financial protection to people who become totally and permanently disabled and can’t work again. An approved claim gives the insured person a lump sum payment that helps cover their living expenses, medical care, rehabilitation, and lost income.
Generally, disability insurance is an add-on to life insurance policies, a standalone policy, or provided to members of a superannuation fund.
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Claiming a TPD Payout Through a Superannuation Fund
To receive a TPD payout:
- The insured person must have a physical or psychological medical condition that prevents them from working in an occupation they are reasonably suited to by their education, training, or experience.
- Next, they must meet the policy’s definition of total and permanent disability.
Furthermore, TPD cover differs from workers’ compensation or government-provided disability insurance benefits. Because TPD insurance is private insurance designed to assist those who have acquired a disabling medical condition.
Eligibility to Make a TPD Claim
The first step in making a TPD claim is understanding the eligibility criteria. Here are the TPD requirements:
- You have TPD cover either through a superannuation provider or as a standalone policy.
- This cover must be in place when you stop working, i.e., when your medical condition prevents you from doing your job.
- The disability is anticipated to be permanent, or it’s likely to mean you cannot work again.
You can check your specific eligibility requirements by viewing a superannuation policy statement or by asking your super provider, ensuring you receive the reply in writing.
Splatt’s TPD payout lawyers offer a free case review that can investigate your circumstances and advise on your eligibility. Call 1800 700 125
Eligibility for Multiple TPD Payouts
You can be eligible to claim multiple TPD payouts when you have multiple TPD insurance policies. In this case, you lodge separate TPD claims through each super fund for the same illness, physical injury, or psychiatric condition as long as you meet the TPD requirements of each policy.
Remember that each insurer has different requirements, so even though you may succeed with one insurance company, you may not with another.
Is It Challenging to Claim a TPD Payout?
The success or failure of claiming a TPD payout typically depends on how you satisfy the TPD definition within the insurance policy terms. Sometimes people abandon the claim process because the insurance company’s standards are too demanding. Furthermore, insurers seek any reason to deny or reject a claim to protect their profitability.
Compelling medical evidence that addresses the policy terms can improve the chance of a positive outcome. Expert TPD lawyers understand these requirements.
What Percentage of TPD Claims are Successful in Australia?
What is the Australian TPD claim success rate? Thankfully, data on the percentage of TPD claims that result in a successful settlement is available from the Australian superannuation research company SuperRatings.
Their analysis demonstrates a reasonable chance of receiving a superannuation disability payout when lodging an accurately documented disability claim that satisfies the TPD definition of a disability insurance policy. According to their figures, about 71% of these claims are approved, meaning up to 30% of people lose.
Concerning denied TPD claims, the Australian Securities and Investments Commission states the rate is 16%.
What is the Average TPD Payout Amount in Australia?
Generally, superannuation insurance policy terms and conditions determine the value of a TPD payout, and hence, they vary significantly. Contributing factors in lump sum payout calculations include:
- Your unique circumstances
- The type of physical or mental injury
- Your usual occupation
- How long do you have away from work
An average TPD payout for cover through a super fund is $150,000. An average standalone policy could have an insured amount of $1.5 million, with a maximum of $5 million in Australia.
Some Australian workers have a history of regularly changing jobs and often have more than one live superannuation account with multiple disability insurance policies. These people can be eligible for multiple claims, each assessed on merit.
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Common Types of TPD Payouts
You could successfully claim a TPD payment in a variety of situations, with the most common being:
• Workplace Disability Claims: You might be eligible for a work-related superannuation disability payout if you have an occupational psychological condition or a sickness contracted at work (like mesothelioma).
• Non-work-related TPD Payments: You could have a successful TPD lump sum payment when you have an illness or injury unrelated to your job and can’t work anymore. For instance, a car accident may have caused you permanent damage.
• Terminal or Serious Illness: You can successfully claim TPD insurance when a severe or terminal illness like stroke, cancer, heart attack, or dementia prevents you from earning an income.
• Infectious Disease Payouts: Another cause of TPD claims is infectious diseases like malaria, TB, HIV/AIDS, and other similar illnesses that prevent people from earning a wage.
TPD Insurance Claims for Mental Illness
Permanent physical damage qualifies as a total and permanent disability, and so can a mental illness. However, having a successful mental illness TPD claim payout is more difficult as the damage is invisible. Supporting a claim with evidence like treatment records from a psychologist or psychiatrist helps prove a case. Recognised mental health conditions qualifying for permanent disability insurance claims include:
- Bipolar disorder
- Severe depression
- Schizophrenia
- PTSD
- Obsessive-compulsive disorder
About the TPD Insurance Claim Process
The TPD claims process can be complex and time-consuming, but it helps to understand the how it works. Here is a general overview of the steps for a permanent disability payout:
- Notify the Insurer: When diagnosed with a total and permanent disability, you should notify the insurer. They will outline the claim process and provide the necessary forms and documentation requirements.
- Gather Evidence: Gather relevant evidence, such as medical records, specialist reports, and any other documents that demonstrate the level of permanent disability and its impact on your ability to work.
- Complete the Claim Forms: Complete the claim forms accurately and honestly, providing all the necessary information.
- Lodge a Claim: Lodge the claim forms with all the necessary documentation with the insurance provider, ensuring you keep copies for your records.
- Assessment of the Claim: The insurer will review the claim and assess whether you meet the criteria for a TPD payout, which may involve obtaining further medical reports or consulting with independent medical professionals.
- Decision and Payout: When you have an approved claim, you will be advised of the payout amount, which you receive as a lump sum, usually into your super fund account.
- Appeal Process: You have the legal right to appeal a denied claim. This process involves supplying more evidence. An expert TPD claim lawyer knows the requirements to reverse the outcome.
Please understand that the claim process differs between insurers. So carefully check your policy terms and conditions and follow the instructions provided by your insurance company.
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Requirements for a Successful TPD Payout
While the specific requirements may vary between policies, there are some common factors for successfully claiming a TPD payout with most insurers.
- Long-term Disability: The insured person must have suffered a long-term disability that prevents them from working in their own occupation or any other occupation for which they are reasonably suited.
- Waiting Period: Most TPD policies have a waiting period, which is the period that must elapse after the disability occurs before a claim lodgement. This period typically lasts 3 to 6 months.
- Age Limit: TPD insurance is typically available to workers aged between 18 and 65. However, some policies may have additional age restrictions, so it’s essential to check the policy terms and conditions.
- Policy Duration: The claimant must have held the TPD insurance policy for a period, often called the policy duration, typically ranging from 1 to 3 years.
How Long is a TPD Insurance Payout?
When you have a valid TPD insurance claim, you may be curious about how long it takes to get a TPD payout. In Australia, it takes between 6 and 12 months to get a disability insurance payment. Once the insurer has completed their evaluation (generally within six months), the superannuation trustee will conduct an additional examination that often takes one or two months to complete. The primary causes of delayed TPD payouts in Australia are:
- Complicated claims
- Those with a sizeable TPD payout amount
- Incomplete forms
- Insufficient and erroneous assessments
An insurance company will find reasons to challenge and delay large TPD claims. If you submit a dubious application, there is typically a lengthy process of information demands while you await responses from each one. Insurance providers count on applicants quitting the application when it gets too problematic.
Recommendations for a Faster TPD Payment
- Submit a precise claim: The best strategy for a faster claim is to lodge an accurately completed TPD claim form with solid evidence. Inadequate lodgements often cause the insurer to request further information, which delays the TPD claims process.
- Include a letter stating your case for an approved payout: Skipping this step often leads to a denied claim.
- Contact the insurer to ensure they have everything they need: History shows that chasing the insurance company hastens a decision.
Factors That Impact TPD Payout Amounts
Various factors determine the value of a disability insurance payout, which typically change between insurance providers and policies. Here are some typical elements that can affect the TPD payout amount:
1. TPD Insurance Policy Coverage
Claims for TPD are for the full insured benefit amount. Unlike a claim for damages in a car or workplace accident, where the damages may not be precisely known, the claimable amount for TPD is the total insured benefit. Generally, the coverage amount varies based on the specific fund in group insurance schemes, such as superannuation funds.
2. Occupation
Some retail policies have occupation-based TPD definitions. In this case, the insured person must be unable to work in their own occupation to be eligible for a payout. However, several have broader definitions, like the inability to work in an occupation for which you have training or experience.
3. Severity of Disability
The severity of the disability and its impact on the insured person’s ability to work are primary considerations. While the severity of the injury or illness does not typically alter the TPD benefit amount, it does make it easier to establish eligibility. Generally, the insurance provider will often assess the total and permanent disability based on medical reports and specialist opinions, which is why solid evidence is vital for success.
4. Premiums Paid
Some policies have a ‘TPD buyback’ feature, allowing the insured to increase their coverage by paying additional premiums. In these cases, the payout amount may be higher when the claimant has opted for this feature.
You must carefully review the policy terms and conditions to understand the factors that impact your TPD payout amount. A qualified TPD lawyer can provide insights into the specific factors that may affect a payout.
How Is TPD Paid Out?
A superannuation account will receive the lump sum payout after authorisation, providing these three options:
- Withdraw some or all of the money
- Put some of your compensation in another account
- Keep the funds in your superannuation for retirement and receive an income stream
What you do after receiving TPD funds will impact tax and your super account balance, so it’s generally best to seek experienced financial advice.
What If a TPD Claim Is Denied?
You can appeal the insurer’s decision for a rejected TPD claim. Typical reasons for denial include:
- Insufficient medical documentation
- Failure to meet the criteria for permanent impairment
Providing more thorough or compelling medical documentation is one option for appealing. A specialist TPD lawyer can also advise on your legal rights and options.
TPD Payout and Centrelink Benefits
People who receive a TPD payout often ask, “Does a TPD payout affect Centrelink payments?” The good news is that there are generally no impacts on Centrelink entitlements when a lump sum benefit deposit is made into a super account.
Social Security generally considers the superannuation account balance only when you reach pension age, usually 65 to 67. Additionally, TPD payouts rarely impact other benefit payments, like child support.
However, withdrawing money from a TPD settlement can change Centrelink’s commitments. It’s best to speak with an experienced financial counsellor before withdrawing funds.
Can You Work After a TPD Payout?
The terms and circumstances of TPD insurance cover and other variables will determine whether you can return to work after a TPD payout. Generally, there are two types of conditions concerning returning to work:
- You cannot work again in your own occupation
- You cannot work again in any occupation
If the first condition covers you, you cannot work again in your usual occupation, but you could train to work in another industry and start a new role. For example, you previously worked in a factory doing physical work, but a back injury prevented you from returning to this job. Following a TPD payout, you completed a university degree and worked in an office.
Because the second condition prevents you from returning to your regular job or other roles, it is more challenging to find employment. However, you could return to work if a new medical procedure helps you recuperate sufficiently to resume working. This means you could work again and keep a TPD benefit.
NOTE: The above is general information. You should consult with a legal professional to understand the terms and conditions of a TPD policy and how they impact decisions about working again.
How Much Tax on a TPD Payout Lump Sum Payment
A TPD payout is not considered taxable income by the Australian Taxation Department. TPD settlements deposited into a superannuation account are mostly tax-free if you leave them there until retirement. However, if you remove funds, you will usually pay tax (known as superannuation lump sum withdrawal tax).
Tax liability changes based on your situation, so it’s best to seek advice from a financial advisor or accountant when deciding how to minimise your obligations. Some general TPD tax implications are:
- If you are aged 60 or older, your lump sum payment is likely tax-exempt.
- Your insurance TPD benefit is not considered taxable when it stays in your superannuation account until retirement age.
- If you are younger than 60, TPD tax calculations consider your age, eligible service date, and superannuation fund joining date.
- When you are younger than your preservation age, a portion of your withdrawal amount is tax-free, with the balance taxed at 22%.
- When you have met your preservation age but are younger than 60, you can transfer up to $225,000 tax-free from your super.
- Some withdrawal amounts are tax-free; the balance is taxed at 22% when you withdraw over $ 225,000.
Other Types of Total and Permanent Disability Payments
Other disability payouts may be available through your superannuation fund. Here are two alternatives:
1. Income Protection Claims
You could be eligible to file a TTD claim against income protection insurance for a temporary disability. This type of cover pays a monthly benefit to replace your lost income and is often an alternative or complementary option to a TPD policy.
2. Critical Illness Claims (Trauma Insurance)
Critical illness insurance provides financial protection when diagnosed with a critical illness. Depending on the policy’s terms and conditions, you may receive one-time or recurring payments to fund your lifestyle and medical expenses.
Legal Advice from Payout Lawyers About TPD Claims
Australian insurance firms are primarily profit-driven and usually seek to minimise responsibility to pay a TPD insurance benefit. An expert TPD lawyer understands the techniques insurers use to deny claims.
Splatt’s TPD payout lawyers provide a free case review that can:
- Locate your TPD policies
- Carefully review the terms and conditions
- Understand the criteria of the TPD definition
- Explain our 100% no-win, no-fee policy
- Provide an estimated payout value
- Explain what you must prove for a successful TPD claim
- Provide a capped price for legal services
Pay when you win, and zero if you lose. It’s free to know where you stand. Call: 1800 700 125
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