In the Australian consumer market, Total and Permanent Disablement (TPD) cover is often looked on as a secondary conversation to have with clients once ‘more important’ benefits – commonly, Income Protection (IP) and Life Cover – have been arranged.
To an extent, this is understandable. TPD is a complex insurance product, and clients can find it difficult to distinguish the kind of assistance TPD would provide them in the event of serious illness or injury that IP or Crisis Recovery wouldn’t. Does it help to pay the costs of occupational rehabilitation and medical fees? To cover debt or everyday bills? To hire a personal carer? Or would it just cover the cost of getting an access ramp installed in a home?
The short answer, of course, is that TPD can assist with all of these. But there does exist a tendency in our industry to focus on IP and Crisis Recovery benefits as providing protection in the event of illness or injury, with less attention given to explaining the importance of TPD. In this situation, clients can come to appreciate the importance of Life Cover, and of creating the highest form of income replacement by combining IP with Crisis Recovery, but may be left wondering about the point of TPD.
A matter of asking the right questions
There are two crucial questions clients should be asked to consider when speaking with their financial adviser about the appropriate level of TPD cover to take out. The first is: ‘In the event that I become totally and permanently disabled, what kind of support would I need to sustain the quality of life I would want?’ The second: ‘What would my life be like if something happened to me and I didn’t have TPD insurance? Or if I didn’t have enough of it?’
When forced to confront these questions, clients often end up surprised by the number of offshoot questions that naturally follow: ‘Who would make decisions on my behalf if I suddenly became unable to support myself?’ ‘Would I become a financial strain on my partner/family?’ ‘Would I have the means to have a professional carer, or to modify my home to be able to keep living there?’ ‘And how would the loss of my income affect my loved ones?’
It goes without saying that all of us would want to have choices available to us if our lives were irremediably altered. But, as the table below shows, with everyone’s personal circumstances and priorities being different, TPD is far from a one-size-fits-all product.
*Source of information and adapted from: Physical Disabilities Council Australia – Towards Disability Allowance: Offsetting the cost of disability – An Analysis
When assessing the needs of your clients, it’s critical, as their financial adviser, that you place yourself in their shoes and outline the various levels of TPD support that could give your client control and financial independence – not only for every stage of their life, but in every eventuation. Understandably, consultations often centre around advisers asking questions in order to gain information on a client’s personal circumstances and their priorities. However, for the sake of ensuring that they understand how TPD actually works, it’s also important that clients are encouraged to ask their own questions about the benefits. This gives them the opportunity to be educated around the recommendations you are making as an adviser, and to prevent possible confusion should there come a time when they need to make a claim.
Suffice to say, the appropriate TPD benefit should be one that will enable a client to afford an access ramp or support rails installed in their house. But it should also instil in them the confidence that, whatever their circumstances become, the cover they’ve purchased would protect their quality of life and allow them to adapt to these circumstances as comfortably as possible.