Deadline of 1 October 2021 for Income Protection Insurance Policy changes

Deadline of 1 October 2021 for Income Protection Insurance Policy changes

If you have been sitting on the fence or getting your income protection policy sorted is still on your “to-do” list, then take note. The 1 October 2021 deadline for significant reduction to the terms and benefits is fast approaching.

 

What are the changes?

If you currently have a comprehensive policy or can get one in place by 1 October 2021, it will incorporate several supplementary and important benefits.

From 1 October 2021, these extra benefits will not be available on new polices due to the changes mandated by the Australian Prudential Regulation Authority (APRA).

Important to check the specific details of your chosen insurer, but a summary of the key changes include: 

  • Income replacement ratios to be reduced to 70%, from 75% currently.
  • Other benefits in the first six months of a claim to be restricted to an additional 20%, i.e. a limit of 90% overall. A material reduction compared to current policies.
  • Income to be calculated on last 12 months income only. This compares negatively to some current policies that utilise more extended 2 or 3 years to satisfy your income benefit calculation.
  • Long benefit periods, such as the traditional ‘to age 65’ will be managed to promote motivation for the claiming individual 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.

 

What actions should you take now?

Get in touch with your adviser and assess your income protection options ASAP.

If you delay your application beyond the current deadline, you risk missing out on key benefits of current income protection policies. These changes could make a big difference to your experience in lodging a claim.