Ageing brings several financial challenges, especially amid a pandemic. Whether you have been saving up for your retirement or already living your golden years, you need to get your finances in order. So if you’re unsure of how to begin, a financial advisor can come in handy,
And with October 1, 2021, a few calendar ticks away, it’s essential to find out what changes to expect in your Income Protection Insurance.
Income Protection Policy Changes
Because significant changes are about to be made to the policies, it is advisable to approach your financial planner as soon as possible before those take effect.
If you are an existing policyholder, you have nothing to worry about because your insurance continues until its contract ends.
But if you are not, here are the significant changes that you should know:
Limitation on Income period to be assessed
The period to be assessed to determine your insurance will only cover your income for the last 12 months instead of potentially up to three years previously. This has a major effect, especially for self-employed and business owners whose incomes fluctuate, especially during the Covid-19 pandemic.
Limitation on Income Replacement Ratio
The income replacement will now be limited to 90% maximum during the first six months and only 70% afterward which is potentially much lower than current policies allow.
Shortened Contract Terms
Insurers can cease the guaranteed renewable policies for life, offering a maximum contract duration of up to five years.
No more ‘agreed value’ income protection cover
The concept of ‘agreed value’ income protection has been removed. Pursuant to Australian Prudential Regulation Authority (APRA) requirements, insurers can no longer offer ‘agreed value’ income protection products. Instead, benefits will be computed based on the claimant’s income at the time they claim them.
Consult Experts at Precept Financial Services
Before these income protection policy changes take effect, get yourself covered. Don’t hesitate to reach out to our panel of financial advisers. We at Precept Financial Services can guide you so you can approach the future confidently.
This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please see our Financial Services Guide for more information.