Total Permanent Disability (TPD): Definition, What Qualifies

What Is Total Permanent Disability?

Total permanent disability (TPD) is a condition in which an individual is no longer able to work due to injuries. Total permanent disability, also called permanent total disability, applies to cases in which the individual may never be able to work again.

Key Takeaways

  • Total permanent disability (TPD) is a condition in which an individual is no longer able to work due to injuries. 
  • Insurance companies classify disability as temporary or permanent and pay out benefits accordingly.
  • Student loans may be discharged under certain conditions if an individual faces total permanent disability.
  • A person will likely not qualify for permanent total disability benefits as long as there are additional, curative treatment options available, or a doctor thinks they may improve over time. 

Understanding Total Permanent Disability

Total permanent disability may involve an individual’s loss of the use of limbs, with the injuries preventing the policyholder from being able to work in the same capacity as they had before the injury. If the policyholder retires or leaves the workforce for any reason other than the injury, coverage may be stopped. If this happens, you may withdraw funds from a Roth IRA without penalty if your account is at least five years old.

Insurance companies classify disability according to the amount of work that an individual is able to perform. Temporary disabilities prevent an individual from working full-time (called temporary partial disability) or at all for a period of time (called temporary total disability). Permanent disabilities prevent an individual from being able to work full-time for the rest of their life, referred to as permanent partial disability, while total permanent disability means that the individual will never work again.

Individuals may insure themselves against total permanent disability through a disability insurance policy. The amount of the benefit is typically a fixed percentage of the policyholder’s average wage, or in some cases, the average wage of individuals in a geographical region. There is a limit on the number of weeks but that is generally determined by when a person turns 65 or when they qualify for full retirement age under Social Security. In some policies, benefits may also be available for a period of time after your return to work.

Special Considerations

In some cases, the law may allow an individual on total permanent disability to engage in business activities if the benefit provided from a disability policy plus the wages earned from additional work does not pass a certain threshold. Students with loans may have their loans discharged under certain conditions if they face total permanent disability, provided that the injury is expected to last a minimum period of time or result in death.

Sallie Mae is one of the few lenders that will forgive a student's balance under these circumstances, even if their parents actually hold the loan(s).

Someone who receives SSD benefits can invest in securities such as stocks, bonds, exchange-traded funds (ETFs), and real estate investment trusts (REITs) without jeopardizing their benefits. Dividend income from stocks, as well as other sources of passive income, is fine as far as the SSA is concerned because it’s unearned income.

Qualifying for Total Permanent Disability

A person will not likely qualify for permanent total disability benefits until the associated medical condition is fixed and stable. What this means is as long as there are additional, curative treatment options available, or a doctor thinks you may improve over time, an insurance company will not call a person “permanently and totally disabled.” Being in this situation doesn't necessarily mean someone won't eventually receive TPD benefits, but it does mean that a person will have to wait until their medical treatment is complete.

Article Sources
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  1. Internal Revenue Service. "Publication 590-B: Distributions from Individual Retirement Arrangements," Pages 28-29.

  2. U.S. Department of Education. "Total and Permanent Disability Discharge."

  3. Sallie Mae. "Student Loan Cosigner Responsibilities."

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