Business Future Insurability

The Business Increases Option is generally an additional cost option to your life insurance policy. It allows you to increase your business related life, trauma or TPD cover without needing to provide additional medical information if a significant business event occurs.

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How does the Business Increases Option work?

Generally, the Business Increases Option is available once each year and must be exercised within 30 days of a business event occurring.

The policy owner will need to apply in writing to exercise this policy option, and while no medical proof will be required, proof of the event occurring will be needed. The increase can be applied to each cover type individually or all of your cover types if you have multiple types of cover.

While business events will differ between life insurance companies, they may include:

An increase in your shares or value of a business entity

An increase in the value of a key person to a business

An increase in the amount of a business loan for which you are guarantor

Proof of the event occurring can be in the form of:

  • A valuation of the business
  • A valuation of the key person in the business
  • Evidence of a Loan Guarantee

An independent valuation of your business will generally be required and additional financial evidence may be requested by your life insurance company.

Limits and exclusions:

Select insurers may limit the amount that you can increase your cover by and how much you can increase your cover to when using this policy option.

While this will differ between insurers, select insurers use the following methods:

To calculate the maximum you can increase your cover by:

The lesser of 25 per cent of your benefit and $2,000,000 per annum and the amount of the increase of your business event.

To calculate the maximum you can increase your cover to:

The lesser of three times your sum insured at the time of the policy application and $15,000,000 for life insurance $5,000,000 for TPD insurance and $2,000,000 for trauma insurance

There may also be an age restriction where you may only be able to use this option to age 65.

Published: April 23, 2015

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