For many Income Protection policy holders who made it through the pandemic unscathed, the impulse to purge insurance from the budget may seem tempting. However, as BDO Private Wealth Adviser Michael Ryan recently told the Australian Financial Review, a nuanced approach to your current or new policy will allow you to trim the premiums while retaining comprehensive coverage, should you fall ill or get injured. In response to Ryan’s advice, we use Aspect Underwriting as a local example to show how your premium changes could play out in real time.
Sacrificing Benefits & Features
Ryan discusses that it’s “possible to reduce income protection costs but it requires sacrificing some benefits and features” which is certainly an option.
Prospective Aspect clients are able to build their own policy via the free, online quoting system that will allow you to consider the costs of being covered. Examples of benefits that can be added range from: Bed Confinement to Family Support and Involuntary Unemployment et al. Full coverage is always recommended but Aspects’ specific benefits are there to help you build a comprehensive policy by allowing you to handpick your features, based on the perceived likelihood of your day-to-day risk.
For instance, if you believe it is possible that, due to your activities, you are at risk of being confined to your bed for more than 72 consecutive hours as a result of being totally disabled during the waiting period, Aspect will pay 1/30th of the Temporary Total Disablement Benefit for each day (including the first 72 consecutive hours) you are bed-confined during the waiting period, for up to a maximum of 90 days. On the other hand, you may consider the Family Support benefit to be more viable in which Aspect pays a monthly benefit of up to $5,000 to a maximum of three months if an Immediate Family Member stops paid work to care for you.
Changing your claim and benefit period
By extending the time off before making a claim from 30 to 90 days, onwards of 30 per cent can be saved for each policyholder. For those contemplating this, Ryan begs the question to each policy holder, “how long one can afford to be without income?”. Aspect Underwriting offers: 14, 30, 60, or 90-day claim periods in order to give you flexibility and a chance to save on premiums within your policy. As for the benefit period, the options range from 1,2 or 5 years.
If you have selected a 30-day waiting period and a 1-year benefit period, your benefit period will start from day 31 and you will receive benefits for a year after that. The longer your benefit period is and the shorter your waiting period is, the higher your income protection premium will be.
State of play for insurers
The pandemic has intensified underwriting scrutiny and risk analysis at a time when general risk is already high due to more natural disasters, inflation and low interest rates, thus putting strain on the insurers ability to derive income from underwriting. In essence, the increase of Income Protection Premiums are inevitable and widespread across the industry and now may be the best time to choose a certified insurer such as Aspect Underwriting who can help you tailor a comprehensive policy, yet also flexible on premium & coverage.