Hello Fellow Investors,
A sobering reality is that personal insurance cover and offerings have deteriorated over the past few years, making it more important than ever to seek professional advice to ensure that you are getting up-to-date information and the right policy to suit your needs.
Let’s take a look at a couple of the more common personal insurance pitfalls.
Income Protection Insurance
Income protection has changed over the years. As an example: On March 31, 2020, the Australian Prudential Regulation Authority (APRA) introduced new rules requiring insurers to stop offering Agreed Value Income Protection policies. Since then, only Indemnity Income Protection policies have been available to Australians.
Why does this matter?
- Agreed Value policies guarantee a fixed benefit at claim time, regardless of your income at that moment.
- Indemnity policies, however, require proof of income at the time of claim, which can result in a lower payout if your income has dropped.
This shift means that the only available option today is potentially less favorable for policy holders, especially self-employed Individuals/contractors.
Why Guaranteed Renewable Insurance Matters
Many of us tend to take our personal insurances for granted once they’ve been set up. But did you know that some providers can choose NOT to renew your insurance cover?
Guaranteed Renewability ensures that your insurer must renew your policy each year – regardless of changes to your health, occupation, or lifestyle. This desirable feature is a cornerstone of retail insurance policies, offering long-term stability and protection.
In contrast, group policies offered through industry or employer superannuation funds are not guaranteed renewable. This means the insurer can renegotiate terms over time, often to the detriment of the insured.
Here’s a real-world example to show you what can happen: In November 2014, TAL renegotiated its Total and Permanent Disability (TPD) terms with Australian Super to include a retraining clause.
- Before: A claim was valid if the insured could no longer work in a role suited to their training, experience, or education.
- After: The insured must also prove they cannot be reasonably retrained or reskilled to qualify for a successful claim.
This change significantly raised the bar for claim eligibility – and all without the policyholder’s consent.
Personal Insurance Cover that Suits Your Needs
As you can see, there are many traps for the unwary!
If you want to ensure your personal insurance remains robust, and that your policy terms are honoured in the future, make an appointment with our Brisbane-based financial planning firm, or try our service: Personal Insurance Made Simple.
Joshua Napier
(Provisional Financial Planner)
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