We encourage our clients (particularly the younger ones) to take a “benefit period to age 65” for their Income Protection policy. But what does this actually mean?

While this is common vernacular, it is actually a little misleading, as generally a policy will only pay until the policy expiry date, which may be age 65 or it may be the policy anniversary prior to or after age 65.

Some years ago, we had arranged for a client to receive an Income Protection claim. After years of abuse to his knees as a tiler, he was no longer able to work and required arthroscopies on his knees. For years he had been taking weeks off work here and there but never long enough to satisfy the insurer, as he always returned to work, needing to support his family. We encouraged the client to take the time needed to recover after his surgeries to secure a claim that would continue until “age 65”. In this way, he had the regular income protection benefit and did not have to return to work to support the family.

The client’s birthday was in June and his policy anniversary was on 1st July. This meant that his policy expired 11 months before his 65th birthday.

As a result, the client received less than what he anticipated, disturbing his financial security and plans prior to turning age 65. You can imagine he was not happy, feeling that he had been “cheated” and planned to seek legal advice, despite the fact that over the four years that the insurer paid the claim, the client received nearly $200,000, providing vital income support to his family.

As such, it is important to read your policy schedule which states the policy anniversary date and the policy expiry date and understand when your policy will expire. It will save you from a nasty surprise on your 65th birthday!

If you're unsure about your policy expiry date for any of your personal risk insurance policies and would like clarification, contact our office on 02 9417 6011 for a review.