#Everyoneneedsaplan for Income Protection Changes as of April 2020

APRA Intervenes in the Australian Income Insurance market to stop Agreed Value policies being offered to clients.

Prior to 1 April 2020, insurance companies in Australia offered Agreed Value and Indemnity Income Insurance contracts.  Agreed Value contracts enabled the insured to take out an Income Insurance policy with the Insured Benefit based on their income at the time.  This meant the insured generally did not have to prove their income at the time of claim, which was useful for self-employed clients who may have income that fluctuates each year based on their Tax Plan.  Indemnity contracts required the insured to prove their income at the time of claim, which may cause a problem if their income was lower compared to when the policy commenced, as the insurer would only pay the claim based on their confirmed income at the time of claim.  Indemnity Income Insurance contracts are generally lower cost when compared to Agreed Value policies.  Therefore, it is important to know what type of Income Insurance policy you have and ensure you don't replace an Agreed Value policy without careful consideration.

If you have an Agreed Value Income Insurance policy prior to 1 April 2020 the insurer must pay any claim on the Agreed sum insured, regardless of your income at the time of claim.  However, if you change this policy, only Indemnity Income Insurance policies will be available to you.  There are other changes to Income Insurance policies as well, such as maximum term, so before you do anything regarding your existing Income Insurance policy make sure you obtain Financia Advice.