Income Protection changes are coming
New government regulations have been introduced that will reduce the benefits on new Income Protection policies written after October 1, 2021. The changes have been mandated by the Australian Prudential & Regulatory Authority (APRA) in response to concerns relating to billion dollar losses on Income Protection policies over the preceding years. These changes not only affect retail Income Protection policies but Income Protection within super as well.
If you currently have an Income Protection policy in place or can get one before October 1, 2021, you will maintain your existing higher benefits.
The changes include:
-Income is to be calculated on the last 12 months only, compared to some current policies offering the highest 12 months in the last 2 or 3 years. For Indemnity policies this is crucial as the insurers claims team go by these figures should a claim be lodged. This change will also have a big impact on self employed clients whose income varies from years to year as well as clients whose job/incomes have been affected by the covid lockdowns.
-Income replacement ratios are to be reduced to 70% from 75% currently. What this means is that if you earn $100,000 pa you can currently insure yourself for up to $75,000pa. Once these new changes are in place the maximum will be 70% meaning $70,000pa on an income of $100,000pa.
-Long benefit periods, such as to age 65 will remain although the way claims are assessed will change. Claims will be assessed under the own occupation definition for the first 2 years only and will then change to any occupation based on training, education and experience.
With the changes above impacting the quality of the Income Protection cover that can be applied for, it is important to consider reviewing your existing Income Protection policies or completing a new application before Oct 1, 2021.
Should you wish to discuss any of the above or would like a free review of your current insurances please don’t hesitate to contact us on 1800 737 926 or complete our contact form.
The information provided here is general only and does not consider your personal objectives, financial situation or needs. Before you decide to purchase a product, it is important to read the relevant PDS.Contact us for a quote