A change to income protection insurance you may have missed

There’s been a fair bit of news to digest of late, so we don’t blame you if you missed a recent change in the life insurance industry. 

If you’ve been thinking about taking out income protection insurance, it’s a change you’ll want to know about because as of March 31, 2020, Australian insurers are no longer offering ‘Agreed Value Income Protection’ policies. 

The adjustment was first proposed by the Australian Prudential Regulation Authority (APRA) back in December 2019 as one of a number of measures put forward to attempt to address the ongoing losses being made by insurers on income protection insurance products. 

As a result, insurers will now only be able to offer ‘Indemnity based Income Protection’ going forward. What’s the difference you ask? 

“Agreed Value Income Protection uses your income at the time of application as the basis to assess the amount payable for any claim you may make in the future,” said Anthony Brown, CEO of NobleOak Life.

“The other, more sustainable type of Income Protection is Indemnity based Income Protection, which uses your income (usually the last 12 months immediately before claim) to assess how much you will get paid at time of claim.”

That means the change is likely to largely affect self-employed workers whose incomes fluctuate greatly from year to year.

Will the new measures impact existing policies? 

In short, no. The change only applies to new policies, so existing policies will be unaffected. In fact, depending on your insurer, you may have only been able to take out indemnity based income protection insurance anyway.

For example, NobleOak has always offered indemnity style Income Protection insurance which means that, if you were to make a claim, you would be eligible to receive up to 75% of your income earned in the 12 month period immediately before the claim. 

Typically, the amount payable is subject to a maximum which is a percentage of your income at the time of application.

“As an insurer we are pleased that our Income Protection product did not need to be updated as we have always offered Indemnity style Income Protection and not Agreed Value," said Brown.

“NobleOak’s Income Protection cover is fully underwritten, which means your health and lifestyle is assessed through a series of questions at the point of application, and in some instances, a medical is also requested. This means that there is more clarity, and no surprises in the event that you make a claim.”

“Also, the important thing to know is that your cover with NobleOak is guaranteed renewable until the cover expiry age. As long as premiums are paid when due, if you already have cover with us we cannot change the terms and conditions to make them worse for you.”

RELATED: Coronavirus shutdown: key must-knows relating to income protection and life insurance

Interested in comparing policies for yourself? Get started by checking out some of the offers in the table below, or head over to the Mozo life insurance comparison hub for an even greater selection.

Compare life insurance - last updated February 27, 2021

Search promoted life insurances below. Advertiser disclosure.
  • Mozo Experts Choice 2020
    Life Insurance

    Protect your family with award-winning life insurance from NobleOak, the Experts Choice Award Life Insurer of the Year for two years running. NobleOak’s competitive covers include Life, Income Protection, TPD, Trauma and Business Expenses, to give you the security you need. Apply now to receive your first month of cover free!

  • Mozo Experts Choice 2020
    Life Insurance

    Enjoy the benefits of award-winning direct life insurance with Insure Me Now's convenient online application. With simple and affordable life insurance solutions, Insure Me Now brings you security that is 100% Australian owned and operated for cover you can trust.

  • Life Insurance

    Get the peace of mind you deserve with cover up to $1.5mil (t&cs) with Zurich Life Insurance and a bonus first month's cover for FREE! Get one of the highest standards of cover with Zurich's commitment to protecting you. As a member of one of the world's largest insurance companies, get the cover you want with a fast and easy application online or over the phone.

*Any information provided on this page should be considered a summary and general advice only. All information should be verified before purchase via the relevant Product Disclosure Statement (PDS).

^See information about the Mozo Experts Choice Life Insurance Awards

Mozo provides general product information. We don't consider your personal objectives, financial situation or needs and we aren't recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.

While we pride ourselves on covering a wide range of products, we don't cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.