There are several changes to income protection coming into effect in October 2021. But what’s changing and how may it affect you?
On 1 October 2021, new changes will be coming into effect for income protection. The Australian Prudential Regulation Authority (APRA) changes are likely to have an impact on people seeking to take out income protection cover or make changes to their existing cover.
Importantly though, for policyholders, while these changes may impact your level of benefit come claim time, the claims process remains the same, according to your chosen provider.
Changes coming into effect include:
- Benefits will be capped at 90% of your earnings for six months and then capped at 70% for the remaining benefit period. This ensures the benefit cannot exceed 100% of your earnings due to extra features and ancillary benefits such as advance payments or rehabilitation benefits.
- The way your income is calculated will change, with income based on annual earnings at the time of the claim, rather than the highest 12 months worth of earnings in the few years prior to the claim. Of course, when it comes to self-employed or business owners where income is variable, income should be taken on the most appropriate time period and reflect future possible earnings.
- Stricter disability definitions are coming into force. For policy providers, this has been put in place to manage the risks that are often involved with longer benefit periods.
Will the changes affect the claims process?
The changes have been put into place by APRA to help improve the sustainability of the income protection insurance industry, which has taken a heavy hit of $3.4 billion worth of losses over the past five years.
It’s always best to speak to the experts, who will be able to advise you on what is changing and how it may impact your individual policy. The TAL team is also available to answer any questions you may have regarding a new policy you wish to take out.
When you need your questions answered or if you need any assistance, contact TAL on 131 825 or get an quick quote using the online TAL CoverBuilder.