My firm belief is that insurance is a means God has provided that enables us to properly care for our family if we become disabled. Statistically up to the age of 65 you are more likely to become permanently disabled than you are to die.

Total & Permanent Disablement insurance is designed to replace the economic loss that my family and I could suffer if I’m completely and permanently disabled. It ensures that my family and I don’t end up financially devastated and on the streets.

Total & Permanent Disablement is often known as the ‘economic death’.

How much cover is enough?

So assuming you agree this insurance is important, the big question is how much Total & Permanent Disablement insurance is enough for your family?

As with life insurance, a good rule of thumb is 10 times your income. So if you’re earning $60,000 – then $600,000 might be about right. However this is such an important aspect to your family’s protection a more detailed calculation is in order.

1. Provisions for mortgage and debt repayment. If you create the debt, then I think it must be cleared on disability? So the first thing is to leave the family debt free.
2. An amount to cover adjustments to your lifestyle – such as having to widen door frames for wheelchair access etc. An amount of say $20 to $50,000 should cover this.
3. An amount to replace some of the income that will be lost. I’m going to assume you have income protection in place at this point… if you don’t then get some. If you have income protection covering 75% of your income then you may not need any more Total & Permanent Disablement insurance – given your mortgage and debts have been cleared.
4. Consider adding some funds for education funding. Are there young children that will require funds to be set aside for higher education and university? If so, make provisions for this too. If you think this higher education will cost $10,000 per year for 3 years then a lump sum provision of $30,000 is needed.

Add up all these amounts and you’ll have the right amount for your family. Round up a little if you like even numbers. Total & Permanent Disablement insurance is relatively cheap and having a little too much is better than not enough.

Where to hold it

Now that you know how much Total & Permanent Disablement insurance you require, then you need to decide where is to place it. Do you hold it and personally own it or have it held within superannuation.

For most the best place to hold insurance cover is in their superannuation as it provides taxation benefits.

For a Total & Permanent Disablement insurance calculation worksheet visit here