A Future Insurability Benefit (FIB) may be available on both income and lump sum life insurance policies. The benefit allows the insured monthly benefit or lump sum insured to be increased upon certain life events, without medical underwriting. Financial evidence will still be required to justify the increase in the insurance cover.
Income Protection policies
With BT Protection Plans Income Protection cover, the insured monthly benefit can be increased once a year at policy anniversary if monthly earnings have risen. The increase in cover can be up to 15%, provided the income ratio does not increase, the new level of cover is within maximum limits, and the total of all FIB increases is no more than the original insured amount. The income ratio refers to the amount of insured monthly benefit compared to monthly earnings, which is determined at policy commencement. For example, if the original policy only insured 50% of monthly earnings, any increase could not bring the percentage of current income insured above 50%. In practice, most policies insure the maximum ratio (75% or 80% including superannuation option) at policy commencement.
Lump sum policies
With lump sum cover, some policies only include three or four life events that allow the sum insured to be increased without medical disclosure. BT Protection Plans Term Life, TPD or Living/Trauma policies include 12 events:
commencing or ceasing a de facto relationship,
giving birth or adopting a child,
a child commencing secondary school,
completing a post-graduate degree,
changing tax dependency status,
receiving a salary increase,
taking out or increasing a mortgage,
becoming a carer,
a spouse dying,
or a periodic increase.
A periodic increase allows cover to be increased every three years, if none of the other FIB events have been used during that period. Generally, the maximum amount that lump sum cover can be increased by is the lower of $250,000 or 25% of the original sum insured. However, if the salary increase event is used, additional cover is also limited to five times the salary increase. If the mortgage event is used, additional cover is limited to $250,000, 50% of the original sum insured and the supplementary loan amount. The BT Protection Plans FIB has the highest expiry age in the market, for lump sum policies the benefit can be utilised up until age 65.
All of the FIB events align with life changes that would generally result in a requirement for more cover. The value of an expansive FIB is that cover can be increased at a time when it would otherwise be difficult to obtain through a new policy. This is because medical underwriting is required with a new policy, and the client is likely to be older, or they may have experienced deterioration in their health. Therefore, the FIB is one of the most important features of a life insurance policy, allowing the sum insured to adapt to the client’s life changes over time.
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The Insurer of BT Protection Plans is Westpac Life Insurance Services Limited ABN 31 003 149 157, AFSL Number 233728.
The Issuer for all the products described in this document, except for Term Life as Superannuation and Income Protection as Superannuation, is the Insurer.
For Term Life as Superannuation and Income Protection as Superannuation (part of the Westpac MasterTrust ABN 81 236 903 448, SFN 281 412 940, SPIN WFS0341AU, RSE Registration R1003970 (Westpac MasterTrust)), the issuer is Westpac Securities Administration Limited ABN 77 000 049 472, AFSL Number 233731, RSE Licence Number L0001083 (WSAL). The trustee of Westpac MasterTrust is WSAL.
The Insurer and WSAL are wholly owned subsidiaries of Westpac Banking Corporation ABN 33 007 457 141 (the Bank). Neither the Bank nor any member of the Westpac Group (other than the Insurer) guarantees the benefits payable in relation to Protection Plans.
This information has been prepared by the Insurer and is for use by advisers only. It is not to be copied, used, reproduced or otherwise distributed, circulated or communicated to any retail client or any other party, or attributed to any member of the Bank. The information provided is an overview only, is general in nature and does not take into account any personal circumstances. Conditions, limits and exclusions on cover apply and are explained in the BT Protection Plans Product Disclosure Statement and Policy Document. Neither the Insurer, nor WSAL, intend that this publication not be used as the primary source of the readers’ information, but as an adjunct to their own resources and training.