Life incidents and TPD and Income Protection Insurance

It is late in the last quarter of an amateur footy match and the scores are close. The pressure is on and a finger gets hurt during a tackle. It hurts a bit however the adrenaline is flowing so play on. Later that night there is not a lot of movement in the finger however no pain. No pain is good however no movement not so good. Off to hospital next morning and outcome is it is not broken so wait to see if the movement returns over the next 6 -8 weeks otherwise surgery will probably be required as in that case it is likely to be a ruptured tendon and that can only be repaired surgically should that be the case.

In this case the player has medical training and knows that if the tendon has been ruptured it should be repaired ASAP as the longer you wait the less chance of full movement being returned to the finger. This person is a Physiotherapist so it is very important that full movement is restored to the finger otherwise they will not be able to do their job with the same effectiveness as previously. Imagine if they were  a surgeon.

This highlights the difference in an insurance context between own occupation Total Permanent Disablement insurance cover (TPD) and Any Occupation TPD. As a physio or surgeon restricted movement in your fingers make it difficult or impossible to do the normal duties of the occupation that you have been trained to do. You could do other occupations even within the hospital environment such as being an Orderly or general cleaning however that is not what your years at Uni was about.

Imagine if the footballer had TPD cover Own Occupation in their super fund. In this case they have the correct insurance however in the wrong place. Being a footballer you can imagine they are under 30 years of age. Being a Physio or a Surgeon it is not hard to see if the one injured finger was two or three fingers there is no hope of working again in their profession so they get the TPD payout from the insurer however they cannot get the money out of the superannuation fund as it does not meet a condition of release from the super fund based on the SIS legislation as they are not Totally Permanently Disabled under the any occupation definition.

It is very important to have the right cover for you in the correct place and a call center or online application will not give you that advice. It also depends on  your job. I am a financial planner and had a business partner some years ago that lost two fingers and restricted movement in a third finger after an incident with an angle grinder on the weekend. (underlying message of this blog is dont have a life on the weekend) and that made no difference to his working life when he eventually returned to work after his recuperation and IP claim however would be devastating to someone in a different occupation where you need to use your hands and fingers such as some medico’s dentists and a lot of tradies.

That brings us to the income protections policy (IP). The standard in a lot of big employer funds is that you get your salary continuance after a 90 day wait. A lot of times there is also a set amount of cover that you are protected for however it has no relevance to your monthly income and in a lot of cases will not meet your home loan repayment let alone your normal cost of living.

In this case the person will be off work for 6 weeks after the surgery or 42 days. They could have a personal Income protection policy that commences a payout after 30 days and also provides benefits if you go back to work on limited duties. In that case it could payout the difference between your income on limited duties and the monthly amount that you are covered for. Income protection or salary continuance cover (two names for the same thing) is very important to have as it works together with the TPD insurance and assists in covering the gaps. In this real case the person is 22. What happens if the finger injury does not heal as it should and it has a material impact on their capacity to do their job. In that case they would not have paid the HECS on the Physio degree and can no longer work as a Physio. The HECS is still due and you dont have the earning capacity anymore.

If you imagine the surgeon or physio that can no longer work in their profession because of an injury they could work at a Uni as a lecturer however that income could be less than what they would earn in private practice in their profession. In that case the professional may have received an Own occupation TPD payout and they could also receive a top up from their Income Protection policy if the income that they earn in their new job or occupation is less than what they were earning when they were a physio or a surgeon.

The question you need to ask yourself is ” Do i have an occupation that i studied for or had specialised training to get my qualification ?” (Eg how does a bricklayer go with limited use of the fingers although insurers have different issues with bricklayers and IP)  If that answer is yes then you should look at having own occupation TPD not any occupation and that policy should be in your own name.

When considering your insurance options you should always assume that something happened yesterday to give rise to you making a claim. With that in mind what do you want to happen next.