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TO ensure total protection, it is possible to add total and permanent disability insurance to life cover.

This cover provides a lump sum benefit in the event of the policyholder becoming permanently and totally disabled. Premiums normally are between $1-$2 a week for 24-hour protection, including in the event of death. The insurance is often made available through an employee’s superannuation plan.

The amount of cover depends on how many units the policyholder pays or buys per week.

A typical example is one that is provided to members of Just Super, which uses ING Life Limited as its insurer.

A member is able to pay for between half a unit at 90 cents a week to six units for $10.80 a week for both death and TPD cover.

For workers aged between 16 and 55, half a unit provides the family in the case of death or TPD of $40,000, while six units provides cover of $480,000. The level of cover subsequently drops from the 55th birthday so that at age 64, six units for $10.80 a week provides cover of $45,000. Other TPD providers start dropping the cover at an earlier working age.

The amount of the insured benefit depends on the number of units of insurance a member has and their age at the time the person dies or becomes totally and permanently disabled.

For taxation purposes, a death benefit paid is tax free to the extent that they are within the pension reasonable benefit limit. Any part of the benefit above that amount is taxed at the top marginal tax rate.

However, if the death benefit is paid to someone other than a dependant or spouse, the entire benefit is taxed at a concessional rate as an eligible termination pay out.

The tax payable on TPD benefits vary due to factors such as age, length of service and the amount of the benefit.

When considering the insurance that best suits you and your family’s needs, you should consider what type of lifestyle you want to enjoy. You should also factor in things like your age, financial commitments, health and other assets.

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