Is your insurance working for you? Or are you working for your insurance?
The impact of the COVID19 pandemic has effected every aspect of our daily lives. Unfortunately, the cost of personal insurance has also taken a hit. Unbeknown to most people who hold a personal insurance policy (especially if the policy is held within super), the effects of the pandemic have forced nearly all major insurers to reprice their premiums.
According to representatives of some of Australia’s major insurers, the main cause for the upshift in premiums has been the elevated number of claims made during the early stages of the pandemic.
In this article, I’ll briefly discuss a couple of aspects of your Life, Total and Permanent Disability (TPD), trauma and Income Protection (IP) insurances that may help you combat the increase in premiums.
Do you need a policy with CPI indexation? You may notice on your yearly policy statement the cover or benefit amount of your policy increases each year. This is due to your policy having a CPI indexation option selected. As the name implies, your cover amount increases in line with CPI, however this also often results in a higher premium.
Opting to turn off this feature may reduce your premiums over the long term, however it’s important to understand how much you need to be insured for and if your future coverage will be sufficient without the CPI increase.
Waiting Period and Benefit Period on Income Protection (IP)
Apart from your monthly benefit, your Income Protection policy will have two other significant components which determine your annual premium these are your waiting periods and your benefit periods.
The waiting period on your policy determines how long you must be out of work prior to making a claim. A lower waiting period of 30 days will attract higher premiums than a policy with a 90 or 120 day waiting period.
You can increase your waiting period, however you need a plan to cover your income during this time. Options you can rely on in the meantime are personal leave, annual leave and long service benefits. You could also consider your cash reserves, other investments or a redraw facility.
The benefit period on your policy should reflect your needs and duration of your working life. For example, if your Income Protection policy has a benefit period that lasts to age 65 and you plan to retire earlier, you can consider reducing this feature to match your retirement plans. Doing so can drastically reduce your premiums allowing you to free up additional cash flow. Your extra funds can then be saved to self-insure, or alleviate the burden premiums have on your super balance.
Are you paying too much for your coverage? Our knowledgeable advisers can help!
These are only a couple of the aspects we look at when reviewing insurance policies. If you have noticed an increase in your premiums and you would like advice on how to align your policy with your needs, simply call 1300 667 897 to speak with our advisers Chrissie Hendry or Anthony Cerantonio. Alternatively, you can fill out the contact form below, and we will be in touch!
All material contained herein is written by way of general comment. No material should be accepted as authoritative advice and if you wish to act upon the material contain herein, you should contact The MBA Partnership for properly considered professional advice which will take into account your own specific conditions. No responsibility is accepted for any action taken without advice by readers of the material contained herein.