What does total and permanent disability (TPD) mean in Canada?
TPD is a policy definition, not a medical one. Most Canadian TPD coverage pays a lump sum if you are unlikely ever to work again in any occupation for which you are reasonably suited by education, training, or experience. Some policies use an own-occupation test for a limited period before switching to the any-occupation standard.
Is a TPD lump-sum payment taxable in Canada?
A TPD benefit is generally received tax-free if you paid the premiums personally with after-tax dollars. If the coverage was employer-paid, the tax treatment can differ. Because TPD is usually paid as a single lump sum rather than monthly income, tax treatment should be confirmed with an advisor.
How is a partial TPD benefit calculated?
Some policies scale the benefit to the degree of permanent impairment, using a schedule (for example, loss of a limb or an eye pays a set percentage of the sum insured). Full TPD pays 100% of the sum insured; partial impairments pay a proportion.
What is the difference between TPD and long-term disability?
LTD pays a monthly income stream while you remain disabled, subject to ongoing reviews. TPD pays a one-time lump sum once you meet the permanent-disability definition. TPD is final and does not require continuing proof of disability after payment.