Life event: Future insurability benefit
Written and accurate as at: Sep 10, 2017Current Stats & Facts
A personal event, such as marriage, divorce, the birth of a child, a new mortgage or even a salary increase, often requires you to take stock of your financial arrangements and assess whether adjustments need to be made so that they continue to meet your financial situation, goals and objectives.
When a personal event does occur, one area that may need a review is your personal insurances. Depending on the particular event, you may find that your existing level of cover is no longer appropriate and an increase may be necessary – the Future Insurability Benefit may assist in this situation.
Future Insurability Benefit
The Future Insurability Benefit, is an option offered by a range of insurers to help simplify the process of increasing the level of cover for Life, Total and Permanent Disability, and Trauma insurance policies*, without the need for further medical underwriting. This can be beneficial if there’s an unexpected change in your health after the establishment of your insurance policy.
Whilst the personal events that qualify for the Future Insurability Benefit vary between insurers, the most common are as follows:
- Commencing or ceasing a de facto relationship
- A spouse passing away
- Giving birth or adopting a child
- A child commencing secondary school
- Completing a post-graduate degree
- Becoming a carer.
Using the Future Insurability Benefit
Generally, the Future Insurability Benefit can be used for a personal event once in any 12-month period.
To increase your existing level of cover for an insurance policy via the Future Insurability Benefit, you’ll need to complete the applicable form provided by your insurer and in most instances provide evidence of the personal event that has occurred. For example, in the event of marriage, the required evidence may be a certified copy of your marriage certificate, whereas, for taking out a mortgage, the required evidence may be a certified copy of the relevant title deed and mortgage summary.
Please note: When considering the Future Insurability Benefit, it’s important to make sure that any increase in the level of cover for the relevant insurance policy is an appropriate reflection of your changing needs, namely, you are not over or underinsured. We can help with this by reassessing your financial situation, goals and objectives.
It’s also important to make sure that all facets of the relevant insurance policy, not just the level of cover, continue to meet your changing needs.
Other important considerations
There may be certain restrictions in using the Future Insurability Benefit. This will be outlined in the Product Disclosure Statement for the insurance policy. Below we provide a general overview of some of the most common restrictions that may apply.
Time restrictions
There is often a specific time frame in which you must lodge an application to use the Future Insurability Benefit for a personal event. For example, the application must be lodged within 30 days of the personal event occurring.
Age restrictions
You must be under a certain age at the time of the personal event. Generally, the age restriction is 55, however some insurers may set this higher or lower.
Allowable increase restrictions
There are often restrictions on the increase allowed to the level of cover and this may depend on the type of personal event that occurs. For example, the allowable increase may differ as per below:
- Marriage – The lesser of: $250,000; and, 25% of the original level of cover.
- Taking out or increasing a mortgage – The lesser of: $250,000; 50% of the original level of cover; and, the amount of the new mortgage or increase in the original amount borrowed under an existing mortgage.
- Receiving a salary increase – The lesser of: $250,000; 25% of the original level of cover; and, 5 times the annual amount of the salary package increase.
There may also be a total maximum increase limit over the life of the insurance policy as well as a minimum increase per event.
Claiming restrictions
In the first six months after using the Future Insurability Benefit, if a claim arises on the relevant policy, there may be restrictions on the payment of the increased portion of the level of cover. For example, the increased portion may only be payable in the event of an accident.
Other restrictions
Depending on your circumstances, eligibility to use the Future Insurability Benefit may also be restricted in certain other conditions. For example:
- If you have made, or are eligible to make, a claim on your insurance policy or any other insurance policy you hold with the insurer.
- If you have a medical loading or medical exclusion on your insurance policy or any other insurance policy you hold with the insurer.
Moving forward
The Future Insurability Benefit can be an important feature of an insurance policy, allowing the level of cover to adapt to your changing needs over time without the requirement to undergo further medical underwriting in the process.
It’s important to note that with an increase in the level of cover, an increase in your payable insurance premium will also follow. As such, assessing your ability to meet the additional insurance premiums moving forward is also a vital consideration.
If a personal event, such as the ones listed above, has recently occurred or is about to occur, then please contact us. We can help you to understand whether a review of your personal insurances is appropriate and the process involved in making adjustments where applicable.
*Some insurers may also offer the Future Insurability Benefit in relation to an Income Protection insurance policy, but generally only regarding the personal event concerning a salary increase. For further details regarding eligibility and restrictions, please refer to your Product Disclosure Statement.