What does total and permanent disability (TPD) mean in the US?
TPD is defined by your policy. It typically pays a lump sum when you are permanently unable to work in any occupation for which you are qualified by education, training, or experience. Some policies apply an own-occupation test initially, then a stricter any-occupation test.
Is a TPD lump-sum payment taxable in the US?
If you paid the premiums with after-tax dollars, the TPD benefit is generally tax-free under IRC §104. If the premiums were employer-paid on a pre-tax basis, the benefit may be taxable. Confirm the specific treatment with a tax professional.
Does SSDI reduce a TPD payout?
A standalone individual TPD policy usually does not offset SSDI. However, group disability coverage that includes a lump-sum feature may coordinate with Social Security. Check whether your policy contains an offset provision for other disability benefits.
What is the difference between TPD and long-term disability?
LTD provides a monthly income while you remain disabled, subject to periodic review. TPD pays a single lump sum once you satisfy the permanent-disability definition. TPD provides finality and does not require ongoing proof of disability after it is paid.