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Could the Proposed 31 March 2020 Income Protection Changes Affect You?
David Campbell, Senior Insurance Advisor at Blueleaf Consulting, shares his advice.
The insurance regulator, APRA, has recently announced proposed changes to the design of Income Protection products offered by life insurance companies.
Income Protection Insurance is a critically important protection offering, so any changes can have a significant impact on new personal income protection policies.
The first changes are expected to be effective from 31st March 2020 and in broad terms, these proposed measures may affect the contract term and income definition of all Income Protection policies:
1. Contract Term – Under the current regime an individual is able to take out an income protection policy that is guaranteed renewable through to age 65 or 70.
Under the changes, whilst you can still have a benefit period through to age 65 or 70, policies will only be guaranteed renewable for a 5 year period. Effectively this means the Insurer may be able to adjust the terms & conditions every 5 years.
2. Income Definition – Currently insurance companies are able to offer Agreed Value policies where the amount of the benefit is guaranteed at time of claim regardless of your income at that point in time.
Under the changes, the amount of your benefit may only be based on actual earnings at time of claim and earnings will have to be substantiated by the insured. If you are self-employed and your income fluctuates this may have a significant impact.
To be sure of the impact on your personal income protection policies, we encourage you, either with existing policies or considering implementing a new policy, to seek advice in this area well before the 31st March commencement.
If you don’t have an existing insurance adviser and wish to speak to someone in regards to the impact these changes may have on you, feel free to contact David Campbell at Blueleaf Consulting on dcampbell@blueleafconsult.com or 02 9242 2130. Blueleaf offers a specialist advice model with dedicated Insurance Advisers and is part of the International Gallagher Group.
