[BEWARE] New Income Protection Changes and How You Can Beat Them!

Let's start with a quick question. Which of these 3 options describe your working situation:

1. You are an employee with no intention of changing in the short-medium term
2. You are self-employed (run your own business, freelancer etc)
3. Your income fluctuates (think bonuses, commission etc)

If you answered 2 or 3 (or think this could be you in the future) read on as these changes affect you directly and you have until the 31st March 2020 to act!

What are the changes?

In December 2019, The Australian Prudential Regulation Authority (APRA) launched an intervention in the life insurance market as they were concerned with the sustainability of the insurance companies after witnessing heavy losses (collectively over $3.4 Billion in the last 5 years)

What does Agreed Value mean?

There are two broad types of income protection policies:

• Agreed Value - this means that you prove your earnings (with financial evidence) when you apply for the policy and you are not required to do this again if/when you claim

• Indemnity - no requirement to provide financial evidence upfront however if/when you claim, you are required to provide financial evidence to support your earnings and claim.

NB: Agree Value policies cannot be entirely funded from your superannuation fund. If you have income protection paid from your super fund entirely, this will be an indemnity contract.

What do you need to do?

If you already have an income protection policy:

• Contact your adviser or insurance company directly and ask them for a breakdown of your current policy.
• Here is a list of questions to help you:
• What is my policy number?
• What is the monthly benefit?
• What is the waiting period?
• What is the benefit period?
• Is the an indemnity contract or an agreed value?
• Does this have stepped or level premiums?
• What are the premiums?

Do I have any loadings or exclusions? If you don't have an income protection policy and you need to get this sorted:

• If you don't have an income protection policy and you need to get this sorted:

There are a number of ways to get this sorted out, firstly, I'd suggest checking out the ASIC (government website) here before getting some quotes.

Here are 3 ways to get some pricing/assistance with this:

• Option 1 - Noble Oak - these guys offer commission-free insurances by cutting out the middle man (advisers). This reduces the cost of these premiums by approx 20%. If you are self-sufficient and do not need any personal advice (including claims assistance) this could work for you.
• Option 2 - LifeBroker - this is another online quoting platform. Heads up, this is owned by the insurance company TAL and as a result, their products often come up as the preferred in the quotes. These premiums will include commission and you will get some help from a representative but again no personal advice/guidance
• Option 3 - Use an Insurance Specialist - this option will likely see you paying a fee for the advice upfront but would include a personalised insurance solution as well as ongoing support. If you are looking for personal advice, you can grab an intro call with me via this link to see if/how I can help.

Here is an example of what my ongoing service offer looks like too so you can compare it to what you are currently receiving.

Conclusion

Given that we are so close to these changes coming into effect, there really is no time to delay this. It is time for you to act now.

No matter if you have a policy at the moment, it is really important that you assess, decide and act.

Make sure you do this early and give yourself plenty of time because once we hit 31st March 2020, there will be no way to go back in time to get this fixed up.

If you have an Agreed Value policy at the moment, good news, there is nothing you need to do (you might just want to triple check to be sure).