The Personal Insurance industry has recently announced major changes to Income Protection which will drastically change new policies moving forward from the 31st of March 2020.
You want to ensure that if you’re hit with unfortunate circumstances and unable to work, you’ll still be able to sustain yourself. This safety net is often the motivation behind taking out an insurance policy. However, as of March 31 2020, the way that Income Protection policies work in Australia will change drastically.
Your ability to earn an income is your biggest asset, how many months would your family be able to cope without your income?
What are the changes?
Well, the major change is that agreed value income protection policies are set to be scrapped, leaving indemnity value Income Protection policies as the sole option.
Previously, agreed value policies involved locking in an agreed amount that the policy would pay out based on income levels at the time that the policy is bought. This meant that regardless of the income you’d be earning at the time of the claim, you’ll still be insured for the amount that was determined at the beginning of the policy.
Under the new conditions, indemnity value policies now mean that insurers will only look at the previous twelve months of income at time of claim and base the payout on the amount earned over that period. So, at the time of the claim, if you have, for whatever reason earned a lower income over the previous 12 months, your claim will pay out according to that amount. Why risk paying for a policy that you can’t fully claim on?
What does this mean for you?
If you’re a business owner that has a variable or volatile income, then you might be at risk. New policies will lose certainty around the amount paid out at the time of the claim. However, all hope is not lost for business owners with variable incomes. There’s still a small window between now and March 31 to look into an agreed value income protection policy.
If you need some advice on an insurance set up that will protect your income, don’t hesitate to get in touch with the Life Insurance Team at BlueRock Private Wealth via phone or email to find a solution that’s right for you.