What happens if my circumstances change after I take out cover?

Your insurance premiums will be based on your health, occupation and lifestyle at the time you buy the policy. You will need to give full and detailed information to the insurance company and may need to provide evidence such as medical or financial records. It is vital that you are completely honest about your situation and your intentions because if you fail to disclose something important it may invalidate your policy.

However, once your cover is in place and the terms and conditions have been agreed, future changes will not usually affect your premiums or the status of your policy. For example, should you decide to change jobs, go overseas or take up a high-risk pastime like skydiving, you will not normally be obliged to inform the insurance company.

On the other hand, if your circumstances improve and you think you may be eligible for lower premiums you can apply to the insurance company for a reassessment. A significant lifestyle change such as giving up smoking could substantially reduce your premiums.

If you have an income protection insurance policy, a change in your occupation or income level will be important, because it may affect how much money you receive if you need to make a claim. There are two types of income protection policy:

• Agreed value – where you can receive a fixed, defined amount of money based on your income at the time you take out the policy.
• Indemnity – where you can receive up to 75% of your income during the year before your claim, up to the limit stated in the policy.

The premiums for indemnity policies are generally about 20% cheaper than those on agreed value policies. They are not generally suitable for people who are self-employed or whose income fluctuates. If your earnings increase after you take out your policy and you want to protect this higher income you will need to purchase additional insurance cover.