"I am now working with a different employer though have the same income. Do I need to set up a new Income protection policy if I am no longer working with the financial planner who set up my previous policy?"
- Question from Matty in Sydney
Top answer provided by:
Based on the facts you have provided, there is no requirement to set up a new income protection policy or update your current insurer. The only time you would need to update your details is when there is a change that requires alterations to your policy, and this would effect the need for further underwriting. An example could be when your income increases and as a result, you wish to increase the sum insured amount on your policy.
An important consideration for you to be aware of is that there have recently been some important changes applied to new income protection contracts. The impact of this for you will likely mean that the cover you have can no longer be sourced in market and you should therefore be very careful that you understand your options, before making a decision to replace or alter what you have got. A summary of these changes are as follows:
- The maximum amount you can insure for will be 60 – 70% of salary (excluding super) depending on the product
- Your entitlement will be determined by an indemnity definition that will only be the last 12 months of income as opposed to the best of the last 3 years
- You will currently have an own'' occupation definition on your policy which on new policies will only apply for 2 years before reverting to any'' occupation
- There are changes to guaranteed renewal ability terms
Another important factor to consider before making changes to your existing policy is to know whether your current contract is an ‘indemnity’ or ‘agreed’ value policy. If it is the latter, insurers stopped offering these contract as of 31 March 2020 and therefore, it is advisable that you determine your need for this type of contract before making changes (agreed value calculates your cover based on your income at the time of application as opposed to the best of the last 3 which can be advantageous if your income tends to fluctuate).
In the event you require alterations to be made to your policy, it would be beneficial to seek assistance from a Financial Planner or a personal insurance specialist which can help you understand any benefits or disadvantages applicable to your personal situation before making changes.
While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.