The number of conditions and coverage offered by critical illness plans has increased dramatically over the last 30 years. The main reason for this is due to providers wanting to pay more claims, however invariably there are times where a client is seriously ill but their condition does not fit into one of the definitions offered by their insurer.
Total Permanent Disability (TPD) was originally introduced to Critical Illness policies to offer more overall protection in circumstances when a client suffers a debilitating injury or illness that might not meet the criteria of the definitions covered by a supplier.
All providers offer TPD on their critical illness plans, with the majority providing it as an optional extra that will incur additional costs.
The benefit is designed to pay out the full sum assured on a plan if the client becomes incapacitated and meets the definition determined by the provider.
Providers may have their own particular wordings but in general the definitions offered will fall into 3 main categories with a new additional definition introduced in Guardian’s new proposition:
Total Permanent Disability – Own occupation: The person covered is unable to perform their own job as a result of illness or injury (i.e. the job before they were incapacitated).
Total Permanent Disability – Any or suited occupation: The person covered is unable to perform any occupation or an occupation suited to the client’s experience and qualifications as a result of illness or injury (i.e. not necessarily their own occupation).
Total Permanent Disability – Activities of Daily Living (Working Tasks or Living Tasks): The person covered is unable to perform a number of living or working tasks as a result of illness or injury. For example, providers may need the client to be unable to perform 3 of the working tasks or 3 of the living tasks (depending on the definitions confirmed within the proposition). These tasks can include walking a certain distance, bending, getting in and out of a car, being able to write etc. In recent times insurers have also added mental failure as part of this.
Total Permanent Disability – Severe Mental Illness (Guardian Only definition): The person covered requires supervision via the mental health team care programme approach (CPA) at its highest level (with or without supervision register) or equivalent
Not all providers offer all 3 of the confirmed main definition categories (plus the Guardian only definition) as part of their TPD proposition as confirmed below:
It is clear that an own occupation definition is preferable to the others. Depending on the client’s occupation however, they may not be able to obtain cover on an own occupation basis. Dependent on the clients’ health or occupation an insurer may offer an Any/Suited occupation or activities of Daily Living/Specified Tasks definition which in general will be much harder to claim on. In more severe cases some insurers may decline to offer total permanent disability at all.
Advisers should also be aware of what happens if their client retires during the policy. In such a scenario an own, any or suited occupation definition would become invalid and therefore the provider should be notified. The provider should then either remove the TPD from the plan altogether or revert to Activities of Daily Living/work tasks definition and adjust the premiums accordingly.
Another significant area to understand when considering the merits of the TPD benefit for older clients or clients with a long term, is knowing when the benefit will expire.
Some providers will offer the benefit until the end of the policy where others will provide the benefit to a specific age as detailed in the following table:
Notably Canada Life, Guardian, Legal & General, LV=, Old Mutual Wealth, Royal London and Vitality all offer terms for the whole life time of the plan. Zurich offer terms to age 60, while Aegon, AIG and Aviva offer terms until the age of 70.
Unlike most critical illness conditions, to be able to claim on TPD there must be evidence that the disability is permanent. As such insurers will generally not pay a claim for six months unless there is medical evidence to prove the permanent nature of the condition.
Due to the extra costs often involved in including TPD it may not be suitable for everyone. This aside it does provide additional cover over and above the standard definitions offered by providers and for those that have a condition that does not meet these definitions could be a financial lifeline.
Overall, Guardian, Royal London and Old Mutual Wealth are worth noting as offer the longest terms allowed for the benefit, which means regardless of the term selected and the age of the client, they would always have the option to claim on the TPD benefit. It is also worth highlighting the introduction of a new definition from Guardian that can be claimed against which offers something new i.e. severe mental illness as a TPD benefit.