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income protection insurance
Guaranteed Renewable Policies
Independent Insurance Advice

Benefits of guaranteed renewable income protection policies

Kathleen Dean
Associate Adviser
2 Feb 2022

On 1 October 2021, APRA introduced changes to Income Protection insurance to improve sustainability in response to over $3 billion in losses incurred by insurers in the past 5 years. APRA deferred the implementation of one of the proposed changes until 1 October 2022.

This is what it means for you:

Current Income Protection insurance applications are for ‘guaranteed renewable’ policies. This means that once you have an Income Protection policy accepted by an insurer and in force, the insurer is guaranteed to renew the policy each year under the same (or better) terms, conditions, and definitions until it expires provided premiums are paid when due. The expiry date corresponds with the benefit period of an Income Protection policy, which can be anywhere from 2 years up until the client’s age 65 or 70. If an insured person’s health, occupation or hobbies change after the commencement of a guaranteed renewable Income Protection policy, the policy would not be affected.

From 1 October 2022, it is proposed that any new Income Protection policies will have a maximum contract term of 5 years. This means at the 5-year mark the insured person would need to provide current information regarding their occupation, income, and pastimes and be offered Income Protection insurance based on the policies available at that time.

This could see the following potential unintended consequences:

  • More expensive and less comprehensive Income Protection policies for clients as they age, which the additional danger of not being offered insurance at all
  • Decreasing incentives for young people to take out insurance earlier to benefit from good health and cheaper premiums given contract terms are limited to 5 years
  • Higher lapse rates as clients decide to not continue with insurance coverage that is less broad than their original policy
  • Reduced ability for clients to claim due to decreased occupation rating or exclusions from newer pastimes
  • Added complexity for consumers, financial advisers and life insurance companies due to policies needing to be reissued every 5 years

Simon Swanson, the managing director of Clearview which is one of Australia’s major life insurers believes that APRA’s current plan is unworkable and will significantly disadvantage consumers. He stated “that the way life insurance contracts have traditionally been legally structured serve the best interests of consumers by ensuring cover is guaranteed renewable. This is how life insurance contracts in Australia and around the world are currently structured, requiring insurers to renew an insured person’s cover each year on the same terms until expiry. Our experience informs us that consumers want certainty in their cover, which, in turn, safeguards their future.”

5-year maximum Income Protection contract terms will significantly disadvantage insurance holders, so if you don’t currently have Income Protection insurance it would be in your best interest to seek advice regarding obtaining a guaranteed renewable policy prior to 1 October 2022.

If you have any questions regarding personal insurance, please do not hesitate to contact the Risk & Insurance team at Hewison Private Wealth, you can get in touch HERE.


Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.au Please note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.