As you may be aware there are significant changes being implemented with respect to Income Protection insurance. From 31 March 2020, under instruction from the Australian Prudential Regulation Authority (APRA), insurance companies will no longer be able to offer Agreed Value Income Protection policies and will only issue Indemnity policies.
What are Agreed Value and Indemnity Income Protection Policies ?
An Agreed Value policy ensures that the sum insured is guaranteed to be paid at claim time, regardless of any reduction of income since policy commencement. When the cover is put in place, the insurer assesses your income to determine the benefit due payable at claim and this provides certainty to you regarding the benefit you may receive.
An Indemnity policy requires you to provide proof of earnings at the time of claim. This involves more administration at claim time and importantly, if your income has reduced since putting in place your cover, the benefit you receive may be reduced below your insured amount. Therefore, there is a risk that you may pay premiums for an insurance benefit amount that is reduced at claim time.
Our Advisors at 360Private have commonly recommended Agreed Value policies where possible for our clients to provide enhanced cover and certainty.
If you are a holder of an Income Protection policy, you will need to consider taking the following course of action:
- If you already have an Agreed Value policy you will not lose this benefit. However, if you have had an increase in your income and your Income Protection policy does not reflect this – please contact us now! We can assist with updating your cover details to ensure you continue to benefit from this superior policy type.
- If you have an Indemnity Value policy, now is the time to contact us for a review to alter to an Agreed Value policy whilst it is still possible to obtain this type of policy.
If you do not have any Income Protection cover, but would like to find out the benefits, you should contact our office as soon as possible to ensure we have the ability to source the superior policy type prior to it being disallowed.
We are available to discuss any questions you may have about these changes, your existing cover or any new cover requirements. Please contact your Advisor, or our Risk Advice team today.