Income Protection Premiums Increase for 2020

Russell Cain
Russell Cain Updated: 16 September 2020

Significant income protection price rises are sweeping across the industry. With the challenging economic times worsened by the Coronavirus, many insurers are forced to increase the price of their policies.

OnePath, ClearView, Asteron Life and CommInsure have recently announced level premium and income protection price increases for customers.

How much your income protection premiums will go up by in 2020

Asteron Life

Existing Asteron Life customers experienced premium rises from 1 January 2020, including 16.7% for Income Protection and Business Expenses, 5.6% for Trauma cover, and a 7.6% premium rise for Total and Permanent Disability (TPD) insurance.

ClearView

Since 22 April 2020, new and existing Clearview income protection customers with benefit periods of 1,2- and 5-years experienced a 10% premium increase on stepped and hybrid premiums. Those with benefit periods up to age 60, 65, and 70 received a 35% price hike on stepped and hybrid income protection premiums.

CommInsure

CommInsure is also set to increase income protection premium rates. Current customers should expect further details in their upcoming policy anniversary letter.

OnePath

From 15 July 2020, new customers are paying 20% more for OnePath Income Secure Cover and Business Expense Cover. Additionally, level premiums have been removed from Income Secure Cover, Business Expense Cover and Living Expense Cover, and the built-in Unemployment Benefit is no longer available on Income Secure Cover.

Existing customer will experience a 25% rise in base premiums (stepped and level) for Income Secure Cover (excluding Essentials) and Business Expense Cover. As of 19 September 2020, there will also be a 12.5% increase on stepped and level TPD premiums (linked and stand-alone) for both new and existing customers.

Pricing changes will be communicated to existing customers from 22 September 2020, as part of your policy renewal.

What causes insurance premiums to increase?

A decline in insurance companies profitability resulted in The Australian Prudential Regulation Authority (APRA), making big changes to income protection insurance. One of the first significant changes was the end of Agreed Value income protection insurance for new customers as of 31 March 2020. From 1 July 2021, insurers might start to implement even more changes.

Other factors influencing the recent premium rise include:

How to reduce the price of your income protection insurance premiums

Protecting your income is essential, so if you’re experiencing financial difficulties, review our tips for reducing your premiums instead of cancelling cover.

  1. Increase your waiting period: Extending your waiting period can result in a significant premium reduction. For example, a policy with a 180-day waiting period will be much more affordable than one with a 30-day waiting period.
  2. Reduce your benefit period: You can potentially save a lot on premiums when reducing your benefit period, for example, to 5 years, instead of up until your age 65.
  3. Lower your benefit amount: Decrease the level of income provided if your premiums have become unaffordable.
  4. Choose an Indemnity policy: If you have an Agreed Value policy, you might want to consider opting for the cheaper Indemnity option. However, you won’t be able to take out a new Agreed Value in future as they are no longer available for sale. Also, with an Indemnity policy, you run a higher risk of receiving a reduced monthly benefit if your income is less at claim time compared to when you purchase the policy.
  5. Remove additional paid-for benefits: You might be paying extra for other benefits, for example, some companies charge extra to include the claims escalation benefit.
  6. Confirm your occupation: How your insurer rates your occupation has a significant impact on your premium price. For example, a tradesperson will generally pay a higher income protection premium compared to people working “safe” desk jobs.
  7. Shop around: Compare income protection policies from some of Australia’s largest brands and find a plan that provides value and works with your budget.
  8. Annual premiums: You can generally save 5% to 8% on your premiums when paying yearly.
  9. Level premiums: While you’re charged a higher premium at the start of your policy, increases happen more slowly than with stepped premiums because the cost of cover does not increase due to your age.
  10. Claim tax deductions: Income protection premiums are usually tax-deductible if held outside of your super fund and paid with your own money.

Frequently asked questions and answers

  • Can you cancel your income protection policy, and get a refund?

    If you would like to cancel your policy, you’ll need to contact your insurer. Generally, if you have not claimed, you’ll be eligible for a full refund on all monthly premiums paid when cancelling within 30 days after your policy commences. If you paid premiums annually in advance, you’d usually receive a pro-rate refund.

    Take note: No refund is payable when cancelling after the 30-day cooling-off period.

  • How are income protection premiums calculated?

    Your premium is generally calculated each year on your policy anniversary. However, when applying for cover, various factors are taken into consideration when calculating the cost of your policy, including you:
    • Occupation
    • Age and gender
    • Smoking status
    • Health and family medical history
    • Participation in hazardous sports/activities
    • Your choice of benefit amount
    • Selected waiting period
    • Chosen benefit period
  • Will income protection premiums increase after a claim?

    Generally no, your income protection premiums will not increase after receiving a claim payout.
  • Is there GST on income protection premiums?

    No, there is no GST on income protection premiums for policies purchased through a life insurance company. However, it’s best to check with your insurer.

Compare, Save and Buy Life Insurance

Enter your info and let’s get started.

Or call us on:

1300 135 205

Other topics

Ask an Expert?