The way women work, sometimes part-time or having career breaks, means we have less consistent income. Our income doesn’t curve up in a standard career trajectory. Under the new laws, this lack of consistency disadvantages women. Why are women worse off?

1. Policy structure

From 1 April, “agreed” policies on income protection insurance are gone. An “agreed” policy is when you and the insurer agree on your salary when you first buy the policy.

Say, for example, you earn $100,000 per year. You have some time off, go part-time for a period of time, or work less and your income goes down. Then you make a claim. You will still get 75 per cent of your salary ($75,000). The payment is based on the agreed salary and not your recent reduced salary.

But the new rules make the payment based on your recent salary. This is where it stings women. If a person takes maternity leave, works less or struggles with a small business, they earn less. If they need to claim insurance, it’s based on this reduced income, not their income at full capacity.

Increasing your insurance after time out (maternity leave, illness) is also harder. For example, Jess was earning $100,000. Then she had a baby and worked part-time. With less income she wanted cheaper bills, so reduced her cover to reflect her new salary. In the years on mat leave and part-time, she had a health issue. Eventually, Jess goes back to earning $100,000 and wants to put back in place her initial cover. Unfortunately, she will have to go through a new application/underwriting process. She may now face exclusions, loadings or potentially declines based on her current health. Jess may find the process much more expensive and difficult.

The only option here is to continue paying the insurance fees based on earning $100,000. Regardless of actual income or capacity to pay.

2. Insurance in your super

Most super funds have insurance for life, income protection and total permanent disability. Often this coverage is automatic and many don’t know about it.

The new laws require “opt-in” or the insurance is cancelled. The problem is that many people don’t know they have this insurance until they need it. Also, those that might know about it don’t know about the legislation changes.

The idea behind this change was to save people money. The government didn’t want people’s super pilfered for insurance fees no one knew about. But I’ve had several experiences where this insurance was very important, even life-saving.

In one case, a client requested $100,000 from their investments. Of course, this was fine, but I queried the purpose so I could structure the withdrawal efficiently. Turns out, it was a life-threatening health issue with their son and the cash was for medical treatment. I asked whether the son had superannuation. We discovered he had super with insurance. We were able to claim on the insurance and save the family’s investment portfolio. With this new legislation, that would never have happened.

This rule is also another loss for women. To have insurance within your super, you need to be actively contributing to it. This means women on maternity leave or a career break could lose their insurance.

Also, if a person is non-contactable, the super fund diverts the money to the Australian Taxation Office’s “lost super”, the insurance is cancelled. I know of someone who wasn’t aware their super fund had diverted to lost super. If she needed to claim, not only would there be a grim discovery — no insurance — but she also risks not being able to get new insurance.

3. Missing money

Insurance premiums can stress a budget, and they keep going up. To reduce fees, the government enforced commission reductions for insurance agents who sell policies. They also changed the clawback rules. Clawback means the insurer claws back their commission if a person cancels a policy. Previously, this was limited to the first year. Now it’s two years. And the commission has decreased in increments from 110 per cent to 66 per cent. But here’s the kicker: insurance premiums aren’t any cheaper.

It is really important that you take action — know what you have, understand the changes in relation to your personal circumstances, your policies and your superannuation funds. Whether you seek advice from a financial adviser or your superannuation fund or manage it yourself, ensure you don’t make a mistake. We often don’t know what we don’t know, and in our industry, never has there been a truer word. Insurance is complicated and full of jargon. Getting it wrong is very costly, not just financially.

Helen Baker is a licensed Australian financial adviser and author. 

Note: This is general advice only and you should seek advice specific to your circumstances.