Have you got income protection insurance?
Also known as ‘salary continuance insurance’, income protection provides a portion of your income if you are unable to work due to injury or sickness for a certain period of time. The portion of income paid could be up to 75% of your salary depending on the policy.
Income protection changes effective 1 July 2021
Australian Prudential Regulation Authority (APRA) is the regulator of Life companies in Australia. APRA has determined that the Income Protection polices currently available via financial advisers are too generous in their terms and conditions, with claims paid far exceeding the insurance premiums received over the past decade.
For this reason, the way that policies are offered to clients will change in the future. APRA will force insurers to stop offering these types of policies to new clients after 30 June 2021. However, Income Protection policies in place before this date will be able to retain their coverage without any changes to the policy wording, until the policies expire (typically when you turn 65), assuming you retain the policy.
In contrast, new Income Protection policies issued after 1 July 2021 will have a different range of benefits and terms and conditions. Early indications from APRA are that these new income protection policies will expire every five years. If enacted, these five yearly policy expiries could mean that some policies holders will be unable to renew, or press pause on this important cover. This could be due to:
- Someone whose income has stopped (e.g. to raise children or care for aging family members).
- Someone with variable income (e.g. self-employed in industries experiencing an economic downturn).
- Changing career or work status (e.g. a previously employed tradesperson becoming a self-employed contractor).
These changes may mean that you have lesser flexibility if your work status changes for one of the above reasons.
There is a window of opportunity right now to get a superior income protection policy that won’t exist for new clients after 1 July 2021. If you are currently working and don’t have Income Protection cover, we can help you to review your current situation to determine how much cover you need and discuss with you the reasons why Income Protection might be right for you. For peace of mind it is worth having a chat to see if income protection insurance is something that could be of benefit to you.
Please don’t delay your decision to reach out longer than you need to. As Income Protection policies can take several weeks to approve, waiting until March next year may be too late.
Contact our office today on 1800 262 346 or email email@example.com to schedule a meeting
The information provided is general in nature. It has been prepared without taking into account any of your individual objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. This publication is prepared by IOOF for: Bridges Financial Services Pty Limited ABN 60 003 474 977 AFSL 240837, Consultum Financial Advisers Pty Ltd ABN 65 006 373 995 AFSL 230323, Elders Financial Planning ABN 48 007 997 186 AFSL 224645, Financial Services Partners Pty Ltd ABN 15 089 512 587 AFSL 237 590, Millennium3 Financial Services Pty Ltd ABN 61 094 529 987 AFSL 244252, RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429, Shadforth Financial Group Ltd ABN 27 127 508 472 AFSL 318613 (‘Advice Licensees’). This publication is not available for distribution outside Australia and may not be passed on to any third person without the prior written consent of the Advice Licensees. The views expressed in this publication are solely those of the author; they are not reflective or indicative of the Advice Licensees position and are not to be attributed to the Advice Licensees. They cannot be reproduced in any form without the express written consent of the author.