Income protection insurance is a core financial product used in the development of many financial plans. The premise is simple: our income underpins everything we do, paying for our lifestyle, providing for our families and preparing for our future. Income protection insurance allows us our income to continue if we are unable to work due to illness or accident for either a shot period of time, or in some cases, for the rest of our working lives.

In December 2019 APRA intervened in the life insurance industry in Australia with the announcement of their Sustainability Measures for income protection insurance in Australia.

From 1 April 2020 individuals will no longer be able to obtain “agreed value” income protection policies that lock in the value of your insurance based on your current income, regardless of whether your income is reduced in the future. Currently, an agreed value policy allows people to prove their income when they apply for the policy and does not require them their current income at the time of a claim.

All policies from 1 April must be offered on an “indemnity” basis only. This requires a policy holder to prove at the time of a claim that their previous years income has been high enough to justify the insurance benefit they have purchased. If an individual has had time off, changed jobs for reduced income, or is in the gig economy where their earnings fluctuate from year to year, the value the insurance they have purchased may not be able to be paid to them in full if their current income is not as high as previously advised to the insurer.

WSC Group - Private Wealth Pty Ltd ACN 632 928 691 is an authorised representative #1275915 of Merit Wealth Pty Ltd ABN 89 125 557 002. General Advice Warning: This advice may not be suitable to you because contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information. Investment Performance: Past performance is not a reliable guide to future returns as future returns may differ from and be more or less volatile than past returns.