9 out of 10 people I speak to have not heard about disability income.
What they assumed was that total and permanent disability (TPD) is the same as disability income. But they are dead wrong.
Many folks have mistaken the different enhancements (i.e.riders) to TPD like Enhanced TPD, Deferred TPD for disability income. The riders typically refer to how the benefit will be paid out, for e.g., the number of installments and the number of years payment will spread out. In some cases, it's a lump sum. Insurers have also capped the total aggregate payout for TPD to $X million (so buying in excess is not necessarily a good thing).
Yes, you have TPD coverage and you will be compensated but what are the chances of claiming from TPD?
First, you'll need to understand the difference between TPD and disablity income.
The definition of Total & Permanent Disability means that one has to lose a pair of limbs (i.e. both arms, both legs or one arm, one leg, or both eyes) to be compensated by the insurer. This, to me, is a stringent definition to fulfill.
On the other hand, the definition of Disability in a disability income plan is tied closely to one's occupation. You need not lose an arm or leg or eyes to be compensated. As long as the disability resulting from an illness or accident renders you incapable of working to earn an income, you'll be paid the disability income.
Isn't it obvious that the latter definition is more claim friendly?
Insurers generally do not reveal their claim statistics but NTUC Income is transparent. In the month of Dec 2009, the total claim amounted to $9,294,074.00 for life insurance of which $265,138 was paid out due to TPD. This translates to only 2.9%! Shocking but that's the truth.
Well, my readers, do not be deceived by 'fancy' TPD rider names. Get your financial planner to explain to you the definitions in your policies.
