What Is the TPD Definition in an SMSF Policy?

Why the TPD definition matters

Total and Permanent Disability isn’t a single concept as the name suggests. In the insurance world, it’s a set of definitions that vary depending on your circumstances. The definition that applies to your cover at claim time depends on your work status, your age, and the type of TPD cover you hold. Getting clear on which definition applies to you is one of the most important things you can do as someone holding TPD cover.

Under the SMSF Master Insurance Plan available through SMSF Insurance, there are four TPD definitions in operation, each designed for different situations. Understanding which one applies to you means understanding what you’d actually need to demonstrate to make a successful claim.

Definition 1 — Standard Occupation TPD

This is the most common definition for TPD cover inside an SMSF. It applies when you hold Standard Occupation TPD with Death cover inside super, and at the date of disablement you’ve been employed in the 16 months immediately prior (or on leave without pay for less than 16 months).

Under Standard Occupation TPD, you’re considered totally and permanently disabled if all of these are true:

• You’ve been prevented from performing any work, paid or unpaid, for an uninterrupted period of at least three consecutive months solely due to the same injury or sickness
• You’re attending and following the advice of a medical practitioner and have undergone all reasonable and usual treatment, including rehabilitation, for the injury or sickness
• After consideration of all the medical and other evidence, the insurer reasonably considers you incapacitated to such an extent that you’re unlikely ever to be able to engage in your own occupation, and in any occupation you’re reasonably suited to by education, training, and experience

The key phrase is “in any occupation you’re reasonably suited to.” The bar isn’t just that you can’t do your current job — it’s that you can’t do any job within your skill set.

Definition 2 — Own Occupation TPD

Own Occupation TPD is the narrower-definition cover available only outside super, for eligible Professionals and Senior Management. The criteria mirror Standard Occupation in most respects, with one critical difference — the test is whether you can do your specific occupation, not any occupation.

Under Own Occupation TPD, you’re considered totally and permanently disabled if:

• You’ve been prevented from performing any work, paid or unpaid, for an uninterrupted period of at least three consecutive months solely due to the same injury or sickness
• You’re attending and following the advice of a medical practitioner and have undergone all reasonable treatment, including rehabilitation
• After consideration of all the medical and other evidence, the insurer reasonably considers you incapacitated to such an extent that you’re unlikely ever to be able to engage in your own occupation

Or alternatively, if you suffer the permanent loss of two limbs, sight in both eyes, or one limb plus sight in one eye.

The Own Occupation definition is meaningfully easier to claim than Standard Occupation, but as covered on the Any vs Own Occupation page, it’s only available to Professionals and Senior Management earning over $80,000 in office-based roles.

Definition 3 — Home Duties TPD

Home Duties TPD applies to members who are wholly engaged in full-time unpaid domestic duties in their own residence at the date of disablement, and who are under 65 at the time. This definition exists so that a partner or member who isn’t in paid employment can still hold meaningful TPD cover.

Under Home Duties TPD, you’re considered totally and permanently disabled if all of these apply:

• You’ve been unable to perform normal domestic duties, leave home unaided, and engage in any employment for an uninterrupted period of at least three consecutive months
• You’re attending and following the advice of a medical practitioner and have undergone all reasonable treatment, including rehabilitation
• At the end of that three-month period, the insurer reasonably considers you incapacitated to such an extent that you’re likely to require indefinite ongoing medical care and unable ever to perform normal domestic duties, leave home unaided, and engage in any form of employment you’re reasonably suited to

This definition has three components: inability to do domestic duties, inability to leave home unaided, and inability to engage in employment. All three need to be present for a claim to succeed.

Definition 4 — Activities of Daily Work or Mental Illness TPD

This definition applies in three situations: when the date of disablement is after the policy anniversary following your 65th birthday; when you weren’t employed in the 16 months prior to disablement; or when you were on leave without pay for more than 16 months prior.

Under this definition, you’re considered totally and permanently disabled in one of three ways:

Part A — Activities of Daily Work

You’re considered TPD if, for an uninterrupted period of three consecutive months, you’ve been unable to perform at least two of the following five activities without assistance from another adult (with aids or adaptations):

• Mobility — Ability to bend, kneel, or squat to pick something up from the floor and straighten up again, get in and out of a standard sedan, or walk more than 200 metres at normal pace on a level surface without stopping due to breathlessness
• Seeing — Ability to read ordinary newsprint and pass the standard eye test for a car licence (even with glasses or contact lenses), and vision better than legal blindness
• Lifting — Ability to lift with your hands from bench height and carry a 5kg weight 10 metres and place it back down at bench height
• Communication — Ability to speak in your first language with sufficient clarity to hold a conversation in a quiet room
• Manual dexterity — Ability to use at least one hand to pick up or manipulate small objects precisely, or use a pen, pencil or keyboard to write a short note

Part B — Mental Illness

Alternatively, you can be considered TPD if you have a Mental Illness where:

• Your treating psychiatrist, psychologist, or medical practitioner believes the illness won’t improve
• A psychiatrist appointed by the insurer assesses you as having at least 19% impairment on the Psychiatric Impairment Rating Scale, and considers the condition permanent
• You are Permanently Incapacitated