Whether you have an existing income protection policy or are looking to obtain a new policy, the insurance industry is changing rapidly. We are here to help unpack what this might mean for you.
Recent commissions into the insurance industry identified some key areas of change required to help the affordability of cover for individuals and help regulate Income protection policies for insurers.
Over the years, insurers have tried to stay competitive by adding bells and whistle features to their income protection policies, which has created an issue later down the track, where these policies are no longer serviceable, primarily due to long term claims. This has forced the insurer’s hand into increasing existing policy premiums quite exponentially. So if you have a current income protection policy, we suggest you brace yourself for some premium rises.
As a result of the commission, insurers now need to follow strict guidelines in the income protection products they can now provide. Some of the regulation includes:
- Smaller cover amounts (60 – 70% of income)
- Shorter terms for full cover
- The addition of occupation-based cover (ability to perform other occupations via training)
- Reduced cover for claims after age 60
These strict guidelines have resulted in a vast array of new income protection policies flooding the market, each with its own unique offering.
For those with Existing Income Protection Policies
For those with existing policies, you find yourself in an interesting position. On the one hand, you have a more superior product with more features, the ability to cover 75% of your income and a wide range of added extras. But, on the other hand, the insurers are finding these products expensive to run and maintain due to long-term claims absorbing a lot of the cost, so they need to increase premiums to keep up, and you in turn, find yourself with increases of 15% each year. As a result, your income protection policies are becoming harder to afford, and you’re stuck wondering what to do.
There are a few options if affordability is becoming an issue, and our team at Morrows can assist with providing advice surrounding which is the best option for your specific circumstances. These options can include:
- Extending the wait period on your cover (longer waiting periods mean less risk to the insurer and lower premiums)
- Lowering cover amounts
- Changing certain elements of your structure (agreed to indemnity or level to stepped)
It is crucial now more than ever to get financial advice concerning your policies. If your old policies are cancelled, they cannot be reinstated with these old terms and you will lose some of the perks of your original policy. So before taking any action, it is essential to understand and fully consider your options.
New Income Protection Applications
For those looking to apply for a new policy, the new policies still offer great coverage and peace of mind, should you be unable to work due to illness or injury.
Each insurer has developed its own unique type of cover; each has different service offerings and coverage options, which makes tailoring your insurance to your personal circumstance even more important, ensuring you are provided with the cover that best suits your needs.
Please get in touch with a member of the Morrows Private Wealth team if you would like to further discuss your income protection options.