In December last year, The Australian Prudential Regulation Authority (APRA) announced a number of legislative changes to personal insurance. Although designed to make the industry as a whole more sustainable, these changes can have significant impacts on individuals who don't hold individual disability income insurance (i.e income protection insurance) on 31 March 2020.
We've had a number of clients asking us for more information, so we've compiled a cheat sheet outlining the changes and the potential impact to uninsured individuals.
So what are the changes?
As things presently stand, you're able to obtain income protection insurance for a predetermined amount or agreed value. Typically, when obtaining this insurance, the insurance provider will ask you to provide proof of income. Once the policy is in force as well as at claim time, there are no further income questions.
From 1st April 2020, you will no longer be able to obtain an income protection policy for a pre-determined agreed amount, but the payments you're eligible to receive are based solely on your income over the preceding 12 months. These changes will impact you regardless of whether you hold income protection personally or through your superannuation.
The only silver lining with these changes is that they won't impact people who already hold 'agreed' value policies on 1st April.
So what does this mean for individuals?
While on face value these changes may seem fair, and are intended to have a positive impact on the long-term sustainability of insurance providers, there are a few situations where clients may unintentionally be adversely impacted.
If you're looking to take an extended holiday, maternity leave, reducing working hours to do further training, or moving into private practice, there is potential for your income to reduce. Additionally, if a health event occurs during one of these periods, the income protection benefit you're eligible to receive will be lower than what you would potentially be eligible for today.
So pull out your income protection policy this weekend and have a look at it. If you have any questions or concerns about how the new changes will impact you, please contact us on (07) 3363 5800 or firstname.lastname@example.org
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