TPD cover, explained.

TPD pays a tax-free lump sum if an illness or injury leaves you permanently unable to work again. It's built for the worst-case version of losing your income — not a few months off, but never returning to work.

The money is yours to use however you need. People use it to clear the mortgage, adapt a home, fund ongoing care, replace years of lost income, or simply take financial pressure off at a time when everything else is already hard.

Because it pays once and in full, it's designed to solve the permanent problem, where income protection handles the temporary one.

They sound similar and solve different problems, which is exactly why people get caught out.

Income protection pays a monthly amount while you can't work, and stops when you recover or go back. Trauma pays a lump sum when you're diagnosed with a listed serious condition, whether or not you can work. TPD pays a lump sum only if you're assessed as permanently unable to work again.

A simple way to hold it: trauma covers the diagnosis, income protection covers the months off, and TPD covers the situation where work is over for good. Plenty of households hold more than one, because they cover different ends of the same risk.

It's a high bar, and the exact definition in your policy is what counts. Broadly, it means you're unlikely ever to work again because of illness or injury, assessed against a specific test after a waiting period.

Most policies also cover the loss of use of limbs or eyesight, and some include being unable to perform a set number of everyday activities like dressing, bathing or feeding yourself.

Because “permanent” is a strong word, insurers usually assess a TPD claim some months after the event, once it's clear recovery isn't coming. The precise wording matters a lot here, which is a big part of why advice is worth having.

This is the single most important choice in TPD cover, and it changes what you're actually protected against.

“Own occupation” pays if you can't work in your specific job. A surgeon who loses fine motor control could claim even if they could technically do some other work. It's broader, more expensive, and not available for every occupation.

“Any occupation” only pays if you can't work in any job you're reasonably suited to by training or experience. That's a much higher bar — you might not be able to do your old job but still be expected to do something else, and then it wouldn't pay.

Which one you can get depends partly on your job. It's one of the first things we check, because two policies with the same sum insured can protect you very differently.

Think about what would need to happen financially if your income stopped for good.

Usually that's a few big things stacked together: clearing the mortgage and other debt so housing is secure, replacing the income you'd no longer earn, and covering the extra costs disability often brings, like home modifications, equipment or ongoing care.

Then subtract what you already have — other cover, savings, KiwiSaver, and what a partner earns. The gap is roughly what TPD needs to fill.

It's a balance, because cover costs money and budgets are real. Getting the biggest risks covered properly beats spreading yourself thin across everything.

Personal TPD payouts are generally not treated as taxable income in New Zealand — you receive the full lump sum, and in return the premiums generally aren't tax deductible.

Where cover is held through a business, a trust or a commercial arrangement, the treatment can differ depending on how it's structured.

If your cover sits inside a company or trust, have an accountant check it. It's far easier to get the structure right at the start than to untangle it at claim time.

Both, and the choice has real consequences.

Attached (accelerated) TPD sits on your life cover. If you claim TPD, the payment comes out of your life insurance, reducing it by the same amount. It's cheaper, but a claim leaves you with less life cover afterwards — and getting new life cover after a serious disability is difficult.

Standalone TPD is separate, so claiming doesn't touch your life cover. It costs more and keeps both protections intact.

Which fits depends on your priorities and budget. It's one of the trade-offs we model for people rather than guess at.

Not really, and this catches a lot of people out. ACC only covers accidents, not illness. A stroke, multiple sclerosis, a serious heart condition or many cancers can leave you permanently unable to work, and ACC generally wouldn't pay anything.

Even where ACC does apply, it provides a portion of income rather than a lump sum, and it's built around getting you back to work, not around a permanent exit from it.

So the honest question isn't whether you have ACC — it's what happens if an illness, not an accident, ends your working life. That's the gap TPD is built for.

Often yes, though the condition itself may be excluded. When you apply, the insurer looks at your health history and typically either covers you normally, applies an exclusion for related conditions, charges a higher premium, or occasionally declines.

Insurers assess the same history differently, which is one of the real benefits of going through an adviser rather than straight to one company.

And the rule that matters most, on every application: disclose everything, including the things you think are irrelevant. An insurer that knows about something and accepts you can't later use it to decline a claim.

You, or your family, let the insurer know, and they'll ask for medical evidence and information about your work and what happened. Because the definition turns on “permanent”, there's usually a waiting period — often several months — before a claim is assessed, so it's clear recovery isn't going to happen.

The insurer assesses your situation against your policy's specific definition — own or any occupation, the activities test, and so on. Getting the medical evidence lined up properly makes a real difference to how smoothly it goes.

This is exactly where having an adviser earns its keep. We help manage the claim, deal with the insurer, and make sure your case is put forward properly at a time when you've got more than enough else to deal with.