Increasing Claims

The Increasing Claims Option allows your monthly benefit to increase by the Consumer Price Index while you are on claim. It is a way for your monthly benefit to keep up to date with inflation for the length of your benefit period.

This is generally an additional policy option; however a few select insurers have began building this into their policies to add more value.

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How does the increasing claims option work?

Your monthly benefit will increase each month by the increase in the Consumer Price Index or by a pre-determined percentage, if you:

have selected the increasing claims option

are on an income protection claim for longer than 12 months; and

In some cases the insurer may take the larger of the two increases and apply it to your policy.

Please note the option is generally only available on benefit periods of more than 2 years.

When does the increasing claims option stop?

The benefit will generally continue to increase until the earlier of:

The expiry of your benefit period; or

The end of your period of disablement; or

The expiry of your policy

Who might the increasing claim option suit?

The increasing claim option may be suitable for a number of reasons:

Benefit period longer than 2 years

If your benefit period is longer than 2 years, it may be worth considering the increasing claims option.

Cost of living

If you believe you may find it difficult keeping up with the cost of living if you are unable to receive your full income, you may want to consider this option

Case Study:

Peter decides to take out income protection policy with the increasing claims option, so his policy keeps up to date with inflation.

As a result of an accident, Peter severely injured his back and was unable to work for several years. Thankfully he had income protection cover which included the increasing claims policy option.

In his first year on claim, Peter received 75% of his income or $8,000 per month. Thanks to the increase claims option this increased by 5% the following year to be $9,700 per month by year 5 of his claim and $10,700 per month or $128,400 per year by year 7.

If he had not selected the increasing claims option, Peter’s monthly benefit would have remained at $8,000 per month, $32,400 less per year compared to the benefit he received by year 7.

Please note this is an example only and is not indicative of actual income protection benefits available.

Published: July 29, 2015

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