January 23, 2020

Why Income Protection changes set for March 31, 2020 are IMPORTANT for you

Resources Unearthed - Income Protection Insurance

The Australian Prudential Regulatory Authority (APRA) recently announced a range of measures to income protection that aims to sustain this important insurance.

Here I summarise why these changes are SO important, and why high-income earners and self-employed business owners in mining and resources need to act NOW to benefit from favourable definitions that will soon be removed.

Driven by lossesAustralian life insurers who provide these policies are expected to make changes that will downgrade Income Protection insurance benefits from as soon as 31 March, 20201

What do the changes mean?

Changes include insurers no longer offering ‘agreed value’ Income Protection policies and having the freedom to renew (and therefore reconsider) policies every five years.  

To date, Income Protection Insurance has been available on an agreed value or ‘indemnity’ basisIn future, agreed value policies will be abolished and this is of particular relevance if you’re self-employed in the mining and resources industry or you want to lock in an insurance policy based on your current level of income. 

An agreed value policy allows you to justify your income at the time of application, which becomes the agreed sum insured and the amount you would receive should you become totally disabled. 

For an indemnity policy, the amount you would receive would be the lower amount when comparing the sum insured and your income. It’s important to note that in this context, your income is usually defined as the amount of your earnings in the 12 months prior to your being disabled.   

As income fluctuations are common for self-employed people, theres a risk with an indemnity policy that the income protection benefit paid to you could be significantly lower should your income decrease at some time in future. 

APRA has no plans to change existing guaranteed renewable Income Protection policies that are currently in place 2, however for policies implemented after March 31, 2020, insurers will be able to review the policy every five years. At this stage, health matters are excluded from reviewbut insurers will be allowed to reconsider changes to your occupation and change the terms and conditions of the policy which could reduce its quality. 

Take action now… 

If you don’t have Income Protection insurance or would like to review your existing cover, seek advice now to take advantage of quality cover compared to the re-defined terms that will apply should you delay your decision until after March 31, 2020.  

For advice and help reviewing your insurance cover, please contact Brett or James on +61 (0)7 3007 2000 or contact@resourcesunearthed.com.au 


Related Reading

Person Down! Is your business protected?

Income Protection Insurance: Protecting your most important asset

The importance of correct insurance policy ownership


Resources Unearthed is a solutions hub that provides integrated financial, legal, property and accounting & business advisory services for executives, professionals and business owners in mining and resources. 

Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This is general advice only and does not take into account your objectives, financial situation or needs, so you should consider whether the advice is relevant to your personal circumstances. You should also read the relevant Product Disclosure Statements (PDS) before making any financial decisions. 


1 https://www.apra.gov.au/sustainability-measures-for-individual-disability-income-insurance 

2 Please note that these would generally have been established through a professional adviser and would exclude any insurance cover held through a superannuation fund. ‘Guaranteed renewable’ means that once your Income Protection is in place with the insurer, they must continue to offer you coverage, regardless of changes in your circumstances (including health, occupation or income).

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