Total and permanent disability insurance – How does it work?

7 min Read Published: 11 Mar 2022

Total and permanent disability - How does it work?Within the context of life insurance and critical illness insurances, you may come across total and permanent disability insurance. Total and permanent disability focuses on paying claims to people who can't continue to fulfill occupational or daily living functions. This means that it extends to mental and physical incapacity. Although there are relatively few claims made in this area, it is worthwhile to understand how it can enhance your serious illness insurance.

How does total and permanent disability benefit work?

Total and permanent disability (TPD) benefit is almost always bought or included with critical illness insurance which pays a lump sum if you suffer a medical condition that is covered by the policy. Most life insurance companies include TPD insurance with critical illness insurance but a few insurers may offer it as an optional extra, at an added cost. Any claim for total and permanent disability has to satisfy the insurance company's specific definition and these can vary depending on the nature of your job.

These are very specific in nature to avoid any ambiguity if you make a claim. The definition usually ties into your occupation but can also be linked to your daily life. There are four main categories for the definition and the policyholder is assigned one of these at the outset.

Definitions of total and permanent disability

Total & Permanent Disability Definition Claim is paid if you are permanently and irreversibly unable to:
Own Occupation
  • Do your own job
Suited Occupation
  • Do a job that you are suited to through experience or education
Any Occupation
  • Do any job
Activities of daily living
  • Perform some basic essential functions of daily life

NB: Definitions may vary between insurers and the wording may be very slightly different from the above.

Understanding how to claim for total and permanent disability

It is important to remember that total and permanent disability is one of a number of serious illnesses covered by critical illness - policies usually cover upwards of 40 illnesses. This context is important because the vast majority of claims against critical illness cover are for heart attacks, strokes and cancers which will not be tested against your ability to work or perform functions of daily life. They merely depend on a clinical diagnosis that meets the definition of the relevant illness.

How does the definition of disability affect your claim for total and permanent disability?

The definition of total and permanent disability allocated to you when you buy your insurance depends on your occupation and the nature of your duties.

It can seem like the best definition would be one that protects you in the event that an illness or injury prevents you from doing your own job. However, this definition is usually offered to people who have very low-risk occupations - generally, those who work at a desk and are not required to perform any manual duties. For someone in a clerical occupation, it would be more difficult to show that they were unable to work due to a disability, permanently and irreversibly.  So, the definition would be harder to meet. On the other hand, someone who is very reliant on their physical ability to do their job is unlikely to be offered this definition without sourcing insurance with a specialist provider.

Occupational factors that affect your definition for disability

  • The proportion of time you spend doing manual work 
  • The environment in which you work
  • Specific high-risk tasks 

How total and permanent disability insurance covers manual workers

If your occupation relies on your ability to carry out manual work, you are unlikely to be protected for your ability to do your own job. The actual amount and the nature of manual work that you do will determine whether you find yourself with a suited or any occupation definition as described in the table above. Your work environment will also have an impact (i.e you may have an increased risk of injury due to working at heights or in hazardous environments).

Is total and permanent disability worth it?

When considering the likelihood of a successful claim, it is worth noting that it is common for claims to be declined for total and permanent disability due to the extreme definitions that have to be met for a payout. This happens across all definitions of the benefit. 63 complaints were received by the financial ombudsman service for rejected total and permanent disability claims between 2019 and 2021. 17 were upheld. source: www.financial-ombudsman.org.uk

There is a general lack of understanding of what constitutes a valid claim when using this product because the terms and conditions are interpreted wrongly. Policyholders believe that they will receive a payout if they can't return to work. What can be overlooked is, how difficult it is to prove this to be permanent and irreversible. Many doctors struggle to provide evidence to support their patient's claims as they cannot verify this. In these instances claims are declined.

Total and permanent disability cover alternatives

It is worth ensuring that you have received the best definition around TPD cover but given the low incidence of successful claims, I would suggest that it is far more important to look at sick pay insurance to prevent financial hardship in situations where you are unable to work. You can read more about this type of insurance which can also be called income protection insurance, in our article "A guide to sick pay insurance". Health insurance can also provide financial support if you need to spend a prolonged period of time in hospital or to pay for medical treatment privately.