The rules governing income protection insurance are changing and they have the potential to negatively impact professionals like doctors and surgeons.
Our team here at Nitschke Nancarrow want to keep you updated of recent legislative changes that will have a bearing on your long-term financial strategy as a medical professional.
In this brief overview, we’ll touch on the main points that you should know about the recent changes to income protection insurance in Australia. But please bear in mind that this is still an ongoing process and exactly what the long-term effects of such changes will be remains to be seen. Additionally, this article is not a substitute for professional legal advice.
Why the Changes to Income Protection Insurance?
The insurance industry has been hit hard over the past few years. It’s tallied up some three billion dollars in losses with a third of those losses happening in just the past five years alone.
To help keep the industry afloat and viable, the Australian Prudential Regulation Authority (APRA) has stepped in with legislative changes.
According to the APRA website, “The Australian Prudential Regulation Authority (APRA) is an independent statutory authority that supervises institutions across banking, insurance and superannuation and promotes financial system stability in Australia.”
The recent initiatives are intended to reduce volatility and help the insurance industry recover.
Income Insurance Changes Starting 31 March 2020
The first hard-hitting change that’s coming right up is the end to Agreed Income Protection Policies.
Formerly, this kind of policy assured you of compensation that equaled your income at the time you took out the policy. But now, you cannot be guaranteed of being compensated for the amount you earned at the time your coverage started. Instead, you can only be compensated up to the amount that you presently earned at the time of filing your claim.
Other Income Insurance Policy Changes
There are some other changes that aren’t yet legislation but are expected to come into effect around 1 July 2021:
– Compensation will be based on income from only the previous 12 months
– Compensation is limited to 100% of income value for the first six months and then just 75% for the next six months
– After two years, compensation will be determined by the policy holder’s capacity to perform ‘any occupation,’ even if it would be a lower-paying occupation than the one they lost
Medical professionals like you have specialty skills and incurred debt to practice in their chosen professions. Without doubt you want income protection that guarantees you access to the kind of income you work hard to earn. These upcoming changes to income insurance policies could become a source of frustration and confusion for you, let alone the tangible cost.
With much uncertainty in insurance cover looming on the horizon, it’s all the more important than ever to get the right advice about the best policy for you, and have a secure financial plan to provide for you and your family’s needs in the event that you have to stop working.
Contact Nitschke Nancarrow, specialists in accounting, financial planning, investment and finance, investment and business for medical professionals. We operate in Adelaide, Sydney, Melbourne and throughout Australia. Managing partner Kym Nitschke is available for a free initial discussion about your situation. Call us on (08) 8379 9950 or send me an email.
– Kym Nitschke
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.
Contact Nitschke Nancarrow, specialists in accounting, financial planning, investment and finance, investment and business for medical professionals. We operate in Adelaide, Sydney, Melbourne and throughout Australia. Managing partner Kym Nitschke is available for a free initial discussion about your situation. Call us on (08) 8379 9950 or send me an email.
– Kym Nitschke
The information contained on this web site is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
Taxation, legal and other matters referred to on this website are of a general nature only and are based on Nitschke Nancarrow’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
Nitschke Nancarrow specialises in accounting, tax and financial advice for superannuation. Contact us now for a no obligations discussion about your needs.
