Options available to you regarding your recent insurance premium increases
We are understandably being inundated with requests for assistance with premium increases and questions about Covid protection. We have written to you previously to explain the new insurance landscape and the government enforced changes that insurers must abide by. It has resulted in premium increases across the board from every insurer, not just yours and often in excess of 30%. To learn more about the changes insurers have been required to undertake, we have written this article that you may find useful to understand your increase when considering your insurance options.
Are you protected against illness or death related to Covid vaccinations or Covid itself?
In short, if you have retail advised insurance that has been underwritten, yes you are. Australian insurers registered with the Financial Services Council (FSC) code of practice and will honour Covid related claims. A list of the insurers can be found here as well as their media release guaranteeing Covid cover. Note that Industry Super Fund insurance ('group cover') can legally change the Terms and Conditions of policies retrospectively and may choose to limit cover as a result of Covid.How can Equitem help you navigate premium increases?
We are keen to assist you to save money or to receive financial advice. The following are the ways we can assist you:- If you want to solely to save money on your insurance premiums, you may instruct us to change your insurance policies to reduce your premiums, or
- If you require a full strategic review based on your or current financial situation and goals, you may request a new comprehensive financial plan from us where we will update your financial position, identify your objectives and needs, perform appropriate research and provide you with a new Statement of Advice. This process may not necessarily save you money and will incur additional fees as the purpose of such a review is to provide you with a new financial plan (note: it cannot be limited to insurance only advice).
How can you save money?
Changing aspects of your existing policies can result in significant premium savings. However any variation to your existing policies is a variation to the personal financial advice you received when you took out the insurance, therefore any changes may leave you underinsured and may not provide you or your family with the financial security you require upon the death, disability, illness or accident of yourself or loved ones.Option 1: Reducing the Benefit Amount
Reducing the amount insured (the benefit amount you would receive if you were to make a claim) on any Life, TPD, Trauma or Income Protection policy will reduce your premiums. Each type of policy attracts its own premium. Reducing each/any of the premiums by a percentage will save you a similar percentage amount on that policy's premium (the exact saving will be calculated by your insurer).
Option 2: Remove the Extra Benefits Options
Some insurers offer Extra Benefits as additional cost options on their policies. Examples of such benefits include claim amounts increasing with CPI over the life of the claim, lump sum payments for specified injuries or illnesses (I.e. a broken shoulder), hospital benefits, partial income benefits, reduced waiting periods, Superannuation Guarantee payments or the ability to 'buy back' your cover after a claim to continue to be protected (please refer to your PDS for a full list of benefits). Turning off this option will save you money, but you will forego this extra protection.
Option 3: Extend your Waiting Period
Most Income Protection policies have a 30 day waiting period (the length of time you must be medically unable to work before your policy will commence paying you a replacement income). Extending the waiting period to 60 days, 90 days or 2 years can drastically reduce your premium. However you will have to be off work for longer periods of time and therefore you must ensure you can survive financially with lengthened waiting periods.Option 4: Reduce your Benefit Period
Most Income Protection Policies pay your benefit to Age 65-67 (your anticipated retirement age based on your DOB). You could save money by reducing the Benefit Period to only 2 or 5 years. You must be aware however that if you make a claim, your insurer will cease paying your income replacement benefit after either 2 or 5 years. If you are still unable to work, no further payments will be made and you will be reliant on personal savings and/or potentially government disability benefits for an income.Important Considerations:
- If you reduce your benefits and wish to add them back again in the future (I.e. you want to increase your cover again, add back benefits or reduce your waiting periods or switch insurers), you will be subject to new applications and medical underwriting, you will only be able to access the new style of insurance policies and you may not qualify for insurance.
- Making these changes may leave you in a detrimental financial position if you were to ever make a claim on one of your policies. Making these changes are 'self-directed', we will execute the changes for you, but unless you request a new comprehensive financial plan, we have not taken into account your current financial situation, the appropriateness of insurance, the claim outcome or the impact the changes you make will have to your personal and financial goals.
General Advice Warning
This information has been prepared and provided without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness (having regard to your objectives, financial situation and needs) and any other information pertaining to your superannuation product by referring to its PDS.
