From 1 October 2021, all on-sale Income Protection (IP) products changed in line with APRA’s recommendations to improve the sustainability of the industry and reduce the losses incurred as a result of poorly performing IP products.
NEOS’ Income Support Cover has been designed based on guidance provided by the Actuaries Institute, to provide simple, sustainable and affordable cover that meets the needs of everyday Australians.
You can read more about NEOS’ Income Support Cover, including features and optional extras here.
For further background information on the changes to IP, please see the APRA and Actuaries Institute websites.
NEOS has well and truly emerged as the new leader in Australian life insurance.
Our top priority for 2021 is – and always will be – providing outstanding service.
This includes providing every adviser with a dedicated BDM, underwriter and service consultant, plus easy access to senior management. Our “back to basics” claims service also ensures that every claimant is treated as an individual and given the utmost care and attention. Read more about the NEOS Experience.
Your questions answered
We can appreciate there’s been a lot of industry information to absorb lately and that there’s still a lot of questions you may have.
So, we’ve summarised some of the key questions we received in our webinar series for you below. Remember, if you missed our webinars, or you’re still unsure about our new product, please reach out to your BDM and they’ll be happy to help!
Yes. The most significant change is that while disability is initially assessed based on the client’s ability to work in their regular occupation, after the first two years on claim, this changes and the client will be assessed based on their ability to work in any occupation for which they have education, training or experience.
To be totally disabled, a client must be unable to perform all of the important income producing duties of their regular or any occupation and there are no income or hours-based disability definitions.
For partial disability claims, post-disability income will be based on the client’s work capacity.
For most clients, the maximum monthly benefit they may be eligible for is effectively 70% of their pre-disability income (reducing to 60% after 2 years on claim), provided they do not have material sources of passive income or any ongoing business income.
For annual income above $200,000, we’ll reduce the proportion of income that can be insured and the monthly benefits that may be payable.
For clients who have passive income that exceeds 10% of their pre-disability income, this will be partially offset from their monthly benefit.
You can refer to the NEOS Protection PDS which includes examples and a simple formula you can follow to calculate monthly benefits.
Yes. Compulsory superannuation contributions no longer form part of your regular income and are now separately insured under the Superannuation Contribution Option. These will be paid directly to the client’s super fund as a personal contribution.
Insurable income is also limited to what can be earned in 50 hours, where these hours are separately recognised and paid.
Variable sources of income, such as commissions and bonuses, are also capped so that they comprise no more than 30% of a client’s insurable income. However, exceptions apply at underwriting for roles that are sales-based.
There is a new exclusion for illness or injury sustained as a result of or related to participation in criminal activity or periods of incarceration.
There is also a new exclusion where illness or injury is a result of or related to a client being unable to work due to permanent or temporary banning or suspension of their licence to operate by relevant governing or industry bodies.
In most cases, investment property losses (e.g. when a property is negatively geared) are likely to be treated as zero. However, where the client has other sources of passive income, these may be reduced by any investment property losses.
Pre-disability income will usually be based on the 12 months immediately before disability. However, we may refer to the most recent financial year if the client is self-employed and not earning a readily identifiable monthly income.
If the client is unemployed or on long-term leave during this 12-month period, we’ll refer to the 12 months immediately prior to when that leave commenced.
If income is subject to material monthly or seasonal variations, we may take an average of the last 24 months.
We will be asking additional questions at underwriting to confirm whether the client has passive income, ongoing business income or receives any abnormal bonuses or commissions.
At claim, we will also the client to provide us with their latest tax return to confirm their level of passive income while on claim.
For self-employed clients, we may also request regular business financial information to confirm any amounts of ongoing business income received by the client while on claim.
Not initially, but there are examples in the PDS to help you calculate this.
We’ll look at building a tool once we know what standards start to develop across the market for new income protection products.
If you need any support with these calculations, our underwriting team can assist you.
Passive income means income which you receive that is not income earned from personal exertion, working or from the conduct of a business. Passive income includes income such as interest, dividends, net rental income, ongoing contractual royalties, annuities, or other similar income.
You can find out more about passive income in our PDS