Keep Up With Inflation | Benefit Indexation

Benefit Indexation, also known as Inflation Protection is a built-in feature that automatically increases your insurance benefit so it keeps up with inflation. The increase will generally be applied on your policy anniversary each year. You can choose to opt out of the increase if you wish.

Benefit Indexation will automatically apply an increase to your policy each year, generally on the policy anniversary. The increase will either be a set percentage – say 5% – or the increase in the Consumer Price Index (CPI). In most cases the insurer will take the greater of the two increases.

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Please note each life insurance company may use a different method to calculate what increase will be applied.  When comparing quotes, please make sure to discuss this with your insurer.

What is the Consumer Price Index?

The Consumer Price Index is one of the indicators of inflation. According to the Australian Bureau of Statistics, it measures “the average change in the price over time paid by households for a basket of goods and services.”

Source: Australian Bureau of Statistics, 26 February 2013

What impact does benefit indexation have on my policy?

Apart from increasing your level of cover, your premiums will increase to account for the rise in your cover. The premium increase will generally depend on the level of cover you have and your age.

If you have chosen to exercise the premium freeze option benefit indexation will generally not be applied to your policy.

It also may not apply if you have a combined life insurance policy and have had your life insurance reinstated by either the Trauma Life Cover Buy Back or Double Trauma option.

Why was it introduced?

The feature was introduced as insurers recognized the need for insurance policies to keep up with inflation. While your policy may have provided an adequate level of cover when you originally took it out, the cost of living will increase.

The benefit allows your cover to more readily meet your potential needs in the future.

Can I opt out of the increase?

You can generally opt out of inflation protection being applied to your policy. The policy owner will need to do this in writing to the insurer prior to the policy anniversary.

This can also be done on the policy application when you are first applying for your policy.

Published: December 1, 2017
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Ask an Expert?


  • Jim |

    l have an income protection claim . On its anniversary the premiums where increased by 18% but they tell me that the benefits was increased by 1,8%. l don’t believe this should be the case, can l challenge this and how do l present my case.

      Mark Anderson |

      Hi Jim,

      Sorry to hear you are currently on claim, hopefully you can return to full health soon.

      Depending on the premium structure of your policy, the annual premium rise could be greater than the increase in benefit. You should definitely check with your provider to see which premium structure your policy has. Another benefit you should check that may be available on your policy is the waiver of premium which returns any premiums paid while on claim. The Product Disclosure Statement (PDS) of your current policy should have the details of what is and isn’t available on your policy.

      We do have a claims team, if you feel we can be of any assistance please don’t hesitate to contact us on 1300 135 205.

  • Adam |

    In my policy, it says the lesser of 5% + CPI. Does anyone know what this means?

      Anneke |

      Hi Adam.
      CPI refers to the Consumer Price Index.

      Meaning, your benefit amount will either increase by 5% or by the CPI to help ensure your policy cover keeps up with inflation. For more information, please have a read of our Benefit Indexation article.

  • Sasha |

    Why would you keep indexation on an income protection policy?

      Anneke |

      Hi Sasha.

      If you want your income protection policy to keep up with yearly inflation (to ensure, the monthly benefit is in line with the cost of living at that time) then you’d generally want to keep indexation.

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