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Total permanent disability for the mortgage life policy

Life is full of unexpected events, some good, some bad. But when the bad events hit, you would want some level of protection so that you are not totally swept away by the hit, you and your loved ones can still survive.

This is primarily why people who have a mortgage are encouraged to get mortgage life insurance, so that when the family’s breadwinner passes away, the family will not have to worry about continual payments of the mortgage debt.

But what if the breadwinner does not die but is disabled? Disability will have the same effect as one’s death since the breadwinner can no longer earn an income. If you become totally and permanently disabled, you may find it hard to continue keeping up with your mortgage. For one, a substantial amount will have already gone to your medical expenses and rehabilitation. Do you have enough savings to pay for household expenses, continuous medical expenses and still have enough for your mortgage payments?

You should consider adding a Total and Permanent Disability (TPD) rider to your policy. There are also instances when Total and Permanent Disability is included in the Critical Illness cover.

Definitions of TPD

Total and permanent disability may differ in definition from policy to policy. This benefit will give a portion of your monthly income for a set number of months in the event that you become totally and permanently disabled. Total and permanent disability may be caused by an injury or illness that results in the permanent impairment (either physical or mental) of a person so that he is unable to do normal work and even non-occupational activities for the rest of his life.

Based on the ABI Statement of Best Practices, one of the five definitions are usually used to cover total disability, if this is included in the mortgage life insurance cover:

Notify the insurance company for changes in occupation

There are times when notification is sometimes required, there are times where it is not.

Some model exclusions for permanent disability

TPD will only pay if you meet the definitions as stipulated in your policy.

If you are injured on the job, worker’s compensation can help to fill in your needs after the injury. But mortgage protection life insurance including permanent disability can help add peace of mind, knowing that you have other sources to help you in your disability.

Do you need disability cover?

If you opted for a mortgage life cover with optional critical illness cover, chances are, you are already covered for total disability. This will pay a lump sum equivalent to the amount of cover (which will be paid out to the lender) when you are diagnosed as totally and permanently disabled and meet the definitions in the policy.

The good news is, you may still receive disability benefits depending on any other cover you have.

Check for overlaps

One issue about disability insurance is that there may be overlaps from different sources of coverage. Other sources include disability insurance from your employer and disability benefits from the government.

However, the principle that works for disability benefit is that you only get as much as you earn, and not more. Any disability benefits you receive from one sources will more often than not affect other income-based benefits you will receive for other sources. Thus, any benefits you receive from your employer’s disability insurance may affect what you stand to get from the UK government.

Latest update: 17.06.2013

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