Upcoming Changes to Income Protection Policies
New government regulations have been introduced that have forced Australian Prudential Regulation Authority (APRA) to mandate all Life Insurance companies to significantly reduce the benefits available on new income protection policies written after 1 October 2021.
If you currently have a comprehensive policy, or you can get one in place by 1 October 2021, you will still have access to a number of extra and potentially valuable benefits currently available.
Here is a quick overview of the upcoming changes:
|Insurable income replacement ratios reduced to 70%.||Insurable income replacement ratios at 75%.|
|Other benefits in the first 6 months of a claim to be restricted to an additional 20%, with a limit of 90% overall.||Current policies offer a range of extra benefits that can double this.|
|Income to be calculated on last 12 months only for the insured’s income.||Some current offer the highest 12 months income in the last 2 or 3 years of the insured’s income.|
|Long benefit periods, such as to age 65, to be managed to maintain a motivation to return to work. This may include a change from “Own Occupation” to “Any Occupation” definition* after 2 years on claim.||The benefit is payable if the life insured is unable to work in their usual (Own) Occupation at full capacity.|
*Any Occupation: You’re unable to ever work again in any job suited to your education, training, or experience.
There is also the likelihood that by October 2022, policies will be guaranteed renewable for no longer than 5 years, compared to age 65 for current policies.
Only some of the Life Insurance companies have released their new products they will be offering post October 2021. However, if you wait for these to be released it might be too late to sign onto the current policies with the added benefits.
If you are thinking of taking out an income protection insurance or know someone who could benefit, we recommend getting in touch with us immediately. Most insurers have set the cut-off date for the existing products around the last week of this month.
If you have any questions, please contact us