Having income protection insurance can be a safety net when one is unable to work due to a temporary illness or disability.

However, only owning income protection is not enough. In order to get the best benefits, it’s important to review the policy each year. You never know if the income policy has changed or if it no longer matches your circumstances.

Regular policy reviews will also help you avoid unreasonable premiums while maintaining adequate coverage and removing outdated conditions. In this blog, we will cover how you should assess and compare income protection policies every year.

Review Your Current Income and Occupation

Income protection policies are based on occupation. So, job transitions can trigger premiums, switch-ups in benefit periods and complete termination of eligibility.

When you initially applied for insurance, it’s most likely the policy was based on your salary and occupational position. But if either or both of those circumstances have changed, your existing cover may no longer fit the situation. These changes include promotions, going part-time, starting new businesses, or moving to different industries.

To review, here are a few questions you can ask yourself.

• Has my income increased or decreased?
• Am I in a riskier or safer job than last year?
• Do my current duties reflect the job title listed on my policy?

Check Your Benefit Amount and Waiting Period

Another thing you need to consider is the benefits and waiting period. Modifying these policy features according to the needs allows the insured to pay lower costs without sacrificing coverage efficiency.

Your monthly payments are based on your benefit amount if an injury or illness prevents you from working. Likewise, the waiting period is the time you must wait before receiving these payments. Longer waiting periods (e.g., 60 or 90 days) reduce premiums but require more savings to cover the gap. While shorter waiting periods offer quicker access to benefits, they are of higher cost.

Here are a few things to consider when dealing with the benefit amount and waiting period.

• Does the benefit amount still cover your necessary monthly expenses?
• Do you have enough savings or leave entitlements to manage a longer waiting period?
• Would a shorter waiting period with a longer benefit duration provide better financial security?

Reassess Any Additional Benefits or Riders

Many policies include additional benefits that can be useful in specific cases and scenarios. However, all of those add-ons might not be necessary for you. Since it comes with an increased premium price, you might be paying extra money for features you don’t need.

Your policy schedule or Product Disclosure Statement (PDS) can help you identify included extras. Check if you really need these benefits such as:

• Rehabilitation support
• Partial disability cover
• Inflation protection
• Superannuation contribution cover

If you’re confused, reach out to your insurer and cancel unnecessary add-ons to lower your premiums.

Compare Premiums and Policy Terms

Income protection premiums can vary significantly between insurers. This is more relevant if you’re self-employed or work in a high-risk industry. For instance, the majority of insurers in Australia only offer protection up to 70% of your income. However, some reliable insurer can offer protection of up to 85% of your income. A few policies even provide loyalty rewards or multi-policy discounts if bundled with other cover like trauma or TPD insurance.

Therefore, to get the most out of your invested money, compare your policies with others by looking at:

• Cost of premiums to make sure you are paying a fair price for your level of coverage
• Policy exclusions and definitions  like “total disability” or “pre-existing conditions.”
• Whether premiums are stepped (increase with age) or level
• Insurer reputation and claims process

Consider Any Health or Lifestyle Changes

If your health or lifestyle has improved since you took out your policy, reconsidering the policy could significantly work in your favour. For example, when you do not engage in harmful activities like smoking and drinking, your insurance premium can be reduced as there is a lesser chance of you getting sick.

On the other hand, if you have started engaging in high-risk activities, like biking and skiing, your current policy may not be enough to cover disabilities. Also, failing to disclose any new health conditions to the insurer could affect future claims.

Check and consider asking these questions at least once a year to make possible changes in your policy.

• Have I quit smoking/ drinking?
• Lost weight or improved a medical condition?
• Have I taken up a new sport or hobby that might increase my risk?

Income protection isn’t a “set and forget” solution. By checking in once a year, you give yourself the best chance to stay covered. Likewise, assessing it at least once a year can help reduce costs and align your policy with your current lifestyle.