From 1 October 2021, Income Protection benefits are limited to a maximum of 90% income replacement for the first 6 months, reducing to 60% or 70% for the remainder of the policy, resulting in a lower ongoing benefit.
The percentage of income covered after the first 6 months will also vary across insurance providers, so it is imperative to ensure you implement a policy that best suits a client’s needs – this can be tricky and difficult to access
The main difference will be from current Income Protection insurance paying a monthly benefit to the insured if they can’t work in their own occupation. For example, if a plumber has a back injury and can’t do all or some of his duties as a plumber, he may be eligible to claim.
From 1 October 2021, a person on an Income Protection claim for more than two years may be forced to return to work in any occupation suited to them by education, training, or experience (so similar to TPD)
For example, if a plumber still has a back injury after two years and can’t do his duties as a plumber, but he can work as a salesman, he will not be able to continue to claim on his Income Protection policy and may be forced to take up employment elsewhere.
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