Income Protection Insurance Policies
New government regulations have been introduced that will reduce the benefits available on new income protection policies written after 1 October 2021.
If you currently have a comprehensive policy, or can get one in place by 1 October 2021, it will include a number of supplementary (and potentially valuable) benefits.
From October 2021, however, these extra benefits will not be available on new polices, due to the changes mandated by the Australian Prudential Regulation Authority (APRA).
The changes include:
1.Income replacement ratios to be reduced to 70%, from 75% currently.
2.Other benefits in the first six months of a claim to be restricted to an additional 20%, i.e. a limit of 90% overall. This compares to current policies offering a range of supplementary benefits which can double this.
3.Income to be calculated on last 12 months income only, compared to some current policies offering highest 12 months income in the last 2 or 3 years.
4.Long benefit periods, such as to age 65, to be managed to maintain a motivation to return to work. This may include changing from “Own Occupation” to “Any Occupation” definition after 2 years on claim.
There is also the likelihood that by October 2022, policies to be guaranteed renewable for no longer than 5 years, compared to age 65 for current policies.
Few companies have released the products they will be selling 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 additional benefits.