TPD [Erwerbsunfähigkeit] is a form of disability insurance for which the benefit is paid when the health of the insured is so seriously impaired by an accident or disease that he will never be able to work again, either at his own or any other occupation. It differs from income protection [Berufsunfähigkeit] in that no recovery is expected.
At first sight, and rather surprisingly, there is great variation from market to market in the form this simple policy takes. This is, firstly, because it is sensitive to political decisions regarding social benefits for those who are severely disabled, and secondly, because it is easy to combine with other life, accident and disability benefits. This WftW describes TPD in the UK and other “Anglo-Saxon” countries before outlining occupational disability in Germany in WftW 269, where no equivalent policy exists.
TPD in the UK has come under scrutiny in recent years as a component of critical illness cover [dread disease]. This is because critical illness policies, in addition to covering up to forty defined diseases also cover TPD, and for several years there had been claims disputes because of various definitions of the benefit in the market. For this reason, in 2011 the Association of British Insurers [ABI] stipulated that five TPD definitions would be mandatory for ABI members. The first three are the inability of the policyholder to pursue his own occupation, a suitable occupation or any occupation ever again. The fourth definition is the inability to carry out three of a list of work tasks ever again. These include being unable to walk more than 200m, climb up and down 12 stairs or lift something weighing 2kg. For those not in work, such as the retired, the insureds must be unable to do three out of six activities of daily living [ADL]. In all five cases, claims are settled with a lump sum payment.
Unlike the UK, in Australia and New Zealand TPD is sold as a rider [Zusatzversicherung] to life policies, either with a cash benefit on top of the life cover, or as an accelerated [vorgezogene] life benefit, the life cover being cancelled on settlement for TPD. The TPD definitions are limited to three: own or any occupation for those in employment, and for those in retirement there is an ADL definition, the TPD risk only being covered after the age of 65 if it is a rider to a life policy.