Income protection insurance has long been a valuable safety net for Australians, providing financial support in the event of illness or injury. One type of income protection, agreed value, was particularly popular for its guaranteed benefit amount. However, due to industry changes and regulatory interventions, agreed value income protection is no longer available for new policies.
With agreed value income protection, policyholders locked in a specific benefit amount when they first purchased the policy. This meant that regardless of any income fluctuations after the initial purchase, the benefit remained fixed. This was particularly attractive to those with variable incomes, such as self-employed individuals or those with commission-based roles.
In 2020, the Australian Prudential Regulation Authority (APRA) intervened in the life insurance market due to concerns about the sustainability of individual disability income insurance (IDII) policies. APRA identified several issues with agreed value policies, including:
To address these concerns, APRA required insurance companies to:
The transition from agreed value to indemnity value has significant implications for policyholders. Those with existing agreed value policies have been able to maintain their coverage, but new buyers are limited to indemnity value options.
When comparing income protection policies, it's essential to evaluate the following factors:
To find the right income protection policy for you, use our comparison tool to compare quotes from leading insurers. You can also consult with a financial advisor for personalized guidance.
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