Agreed Value Income Protection - The end of an era
Since the 'early days', there have been two types of Income Protection contracts offered by life insurers in Australia.
From 31 March 2020, Agreed Value policies will no longer be available.
So, what's the choices at the moment?
An indemnity value income protection policy means you need to provide your income at time of claim.
The Pro's and Con's to this type of policy is that the premiums are less (around 30% discount), but if you are earning less at claim time (example: you have had a tough year in business or a reduction in pay for a period of time, maybe even less hours during a difficult time for your employer), then your benefit will be based on your reduced income, not the original agreed amount.
An agreed value income protection policy your monthly benefit at claim time is determined by your proof of income at 'application' stage, regardless of your income at claim time.
This gives you more certainty that the benefit amount will be as expected. This is ideal for people with incomes that change and can prove their income, like being self-employed or an industry that has it's up's and down's.
What does this mean for you?
Well, if you have, or are looking at income protection, it will be wise to check your policy before 31 March 2020 in order to make sure you can make an informed decision.