Insurance premiums are on the rise and insurers agree that mental health claims have played a part in this increase. Experts, however, are warning against cancelling your policies during such challenging times.
Income protection, or salary continuance, insurance has risen the most dramatically. Michael Nowak, a Brisbane-based adviser and vice-president of the Association of Financial Advisers, says over the past couple of years a conservative estimate is that income protection premiums have risen on average 10%-20% a year, with some insurers increasing their prices by 50%.
“The increases are at a level they’ve never been before and there are a lot of concerns from consumers. You do get worried about their confidence in life insurance,” he says.
“In terms of the influence of Covid-19, the impact has been that disposable spending is affected and this has led people to look at cancelling their insurance or, if they have an adviser, reviewing it and making adjustments to make sure they are appropriately protected but can also balance the cost and come to a solution that meets their needs and budget.”
It’s not a new situation, he says. “Every year we’re engaging with clients to ensure they remain covered, but we do have to take into consideration budgets. That means reducing benefits or removing features.”
Agreed value v indemnity
One benefit that has already been removed for new income protection products, from April 1, 2020, is the agreed value policy, which has been replaced by the indemnity policy. This means policyholders will need to have proof of the income they have been earning for three to 12 months before a claim.
This story is from the October 2020 edition of Money Magazine Australia.
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This story is from the October 2020 edition of Money Magazine Australia.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
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