Life Insurance Cancellation In Australia: What You Need To Know

Life insurance is a way of helping to look after your family's financial future and may provide much-needed security in times of uncertainty. However, there are several reasons why you may wish to cancel your life insurance policy. You might be coming out of a long-term relationship, getting married or divorced, or you could be looking for a more affordable option. Whatever the reason, it's your right to cancel your life insurance policy at any time, but there are a few things you should know and consider before doing so.

Cancelling within the cooling-off period

In Australia, life insurance policies typically include a cooling-off period, which is a grace period of 14 to 30 days from the commencement of your policy. During this time, you can review your policy and cancel it without incurring any penalties or fees. If you decide to cancel within the cooling-off period and haven't made any claims, you are generally entitled to a full refund of any premiums paid. However, it is important to carefully review the product disclosure statement (PDS) and the terms and conditions of your specific policy, as these may vary between insurers.

To cancel your life insurance policy during the cooling-off period, you will typically need to inform your insurer of your intention to cancel in writing. Most insurers will require a letter of cancellation, which should include the policy owner's name and signature, the insurance company's name, the date of cancellation, and a clear statement of your intent to cancel the policy. You can usually submit this letter via email, post, or fax. It is a good idea to follow up with a phone call a day or two later to ensure that your cancellation has been processed.

It is important to remember that once your life insurance policy is cancelled, you will no longer have financial protection in the event of an unexpected death, injury, or sickness, depending on the policy. Cancelling during the cooling-off period may also result in the loss of certain benefits, such as funeral cost coverage or advanced payment refunds. Additionally, if you decide to purchase life insurance in the future, your premiums may be higher due to changes in your age, health, or other factors.

Before cancelling your life insurance policy within the cooling-off period, it is recommended to explore alternative options, such as switching to a different provider or policy, reducing your coverage, or requesting a price freeze from your insurer. Carefully consider your financial responsibilities and ensure that you have sufficient funds to provide for your dependents in the absence of life insurance coverage.

Cancelling after the cooling-off period

Cancelling your life insurance policy after the cooling-off period is possible, but there are a few things you should know and consider first.

First, it's important to understand the implications of cancelling your policy. Once cancelled, you will no longer have life insurance coverage, and your beneficiaries will not receive any sum of money in the event of your passing. This means that your family will be left financially vulnerable, and may struggle to cover things like funeral costs, outstanding bills, and mortgage payments.

If you're certain that you want to cancel your policy, the next step is to contact your insurer. While you should call them initially to confirm your intention to cancel, you will also need to submit a letter of cancellation. This letter should include the policy owner's name and signature, the insurance company's name, the date of cancellation, and a clear statement of your intent to cancel the policy. You can then email, post, or fax this letter to your insurer, and follow up with a phone call a few days later to ensure that your request has been received and actioned.

It's also worth noting that, if you've paid your premiums annually, you may be eligible for a pro-rata refund of your insurance. This information can be found in your product disclosure statement (PDS) or on your insurer's website.

Finally, consider the alternatives to cancelling your policy. If the expense of the policy is an issue, you could look at switching to a different provider or reducing your cover to lower your premium payments. You could also ask your insurer about a price freeze or removing CPI increases from your premium, or suspend your cover temporarily if your circumstances have changed.

Cancelling due to unaffordability

If you're considering cancelling your life insurance policy because you can no longer afford the premiums, there are a few things you should keep in mind. Firstly, understand that once you cancel your policy, you will no longer have financial protection in the event of your death, injury or sickness. This means that your beneficiaries will not receive any financial support to help them cover funeral costs, outstanding bills or living expenses.

Alternatives to Cancellation

Before cancelling your policy due to unaffordability, consider the following alternatives:

• Switch to a different provider or policy: Shop around and compare quotes from different insurers to see if you can find a more affordable option.
• Reduce your cover amount: If you're over 70 and your children are financially independent, you may not need as much life insurance as you once did. Reducing your cover amount will lower your premiums.
• Remove optional extras: Review your policy to see if there are any optional extras that you're paying for but no longer need, such as child cover or income protection. Removing these extras can help lower your premium.
• Freeze your premiums: If you're paying on a stepped basis, you may be able to freeze your premiums at their current price. However, your sum insured will reduce each year.
• Remove benefit indexation: You can choose to opt-out of automatic increases to your policy each year to keep up with inflation. This will lower your premium.
• Suspend your cover: If you're struggling to make payments but aren't ready to cancel your policy, consider suspending your cover for a period of time (usually 3, 6 or 12 months). This will pause your premiums until you're back on your feet.

Cancellation Process

If, after exploring these alternatives, you still decide to cancel your policy due to unaffordability, follow these steps:

• Contact your insurer: Call your insurance provider to confirm that you have the correct policy information and inform them of your intention to cancel.
• Complete a letter of cancellation: This letter should include the policy owner's name and signature, the insurance company's name, the date of cancellation, and a clear statement of your intent to cancel. Check if your insurer has a specific template or form that needs to be completed.
• Submit the cancellation: Send your letter of cancellation to your insurer via email, post or fax. Follow up with a phone call to ensure that your request has been received and actioned.

Remember, if you've paid your premiums annually in advance and cancel your policy, you may be eligible for a pro-rata refund of the unexpired portion of the premiums, minus any cancellation fees or charges. Always review your policy's product disclosure statement (PDS) and check with your insurer before cancelling.

Cancelling due to relationship status change

Cancelling Life Insurance Due to a Change in Relationship Status

Life insurance is a way to help secure your family's financial future and provide much-needed security in times of uncertainty. However, if your relationship status changes, you may want to cancel your life insurance policy. Here's a step-by-step guide to cancelling your life insurance due to a change in your relationship status:

Step 1: Understand the Implications of Cancelling

Before cancelling your life insurance policy, it's important to understand the consequences. Once you cancel, you will no longer have coverage, and your beneficiaries will not receive any financial benefits in the event of your passing. This means that your loved ones may struggle to cover debts, funeral costs, and living expenses.

Step 2: Review Your Current Policy

Before making any decisions, carefully review your current life insurance policy. Consider the level of coverage, the benefits provided, and the premiums you are paying. Also, check if there are any cancellation fees or penalties associated with ending your policy early. This information can usually be found in the product disclosure statement (PDS) or on the insurer's website.

Step 3: Explore Alternatives

Before proceeding with cancellation, it's worth exploring alternative options. You may be able to reduce your coverage or premiums, or switch to a different provider that better meets your needs. Contact your current insurer to discuss possible alternatives and their impact on your coverage and costs.

Step 4: Notify Your Insurer

If you decide to proceed with cancellation, inform your insurer of your intention to cancel. This can typically be done over the phone, but you will also need to confirm your request in writing. Contact your insurer to understand their specific requirements and processes for cancellation.

Step 5: Write a Cancellation Letter

To officially cancel your life insurance policy, you will need to submit a letter of cancellation. This letter should include the following information:

• Your name and signature as the policy owner
• The name of the insurance company
• The specific policy to be terminated
• The preferred end date for your coverage
• Your contact information and request for confirmation

Step 6: Follow Up

After submitting your cancellation letter, follow up with your insurer to ensure that your request has been received and processed. Contact them via phone or email to confirm the cancellation and request acknowledgement of your intent to cancel. This will help ensure that your policy is terminated as per your request.

Remember, cancelling your life insurance policy due to a change in relationship status is a significant decision that can impact your financial security and that of your loved ones. Make sure to carefully consider all alternatives before proceeding with cancellation and ensure you have adequate coverage in place to protect yourself and your family.

Cancelling due to emigration

If you're planning to move overseas, it's important to understand how this will impact your life insurance policy. While some providers offer worldwide coverage, there may be certain exclusions or limitations that come into effect when you're no longer residing in Australia. Therefore, it's crucial to carefully review the terms and conditions of your specific policy to determine if your coverage will still be valid in your new country of residence.

• Review your policy: Carefully read through the terms and conditions of your life insurance policy. Pay close attention to any sections related to international coverage, exclusions, and limitations. This will help you understand if your policy will still be valid in your new country of residence.
• Contact your insurer: Get in touch with your insurance provider to discuss the impact of your emigration on your policy. They can provide you with specific details about any changes in coverage, benefits, or premiums that may occur due to your change in residence. Ask about any additional steps you need to take to ensure continuous coverage while you're overseas.
• Consider alternative options: Before cancelling your current policy, explore alternative options that may better suit your new circumstances. You could consider switching to an international insurance provider or purchasing additional travel insurance that covers medical emergencies and other risks associated with living abroad.
• Understand the implications: Cancelling your life insurance policy means that you and your loved ones will no longer have the financial protection it offers. Assess your financial situation, including any outstanding debts or liabilities, and consider how you can ensure financial security for your dependents without the policy.
• Follow the cancellation process: If you decide to cancel your policy, follow the steps outlined by your insurance provider. This usually involves submitting a written request or completing a letter of cancellation. Make sure to include all the necessary information, such as your insurer's name, policy details, preferred end date, and your contact information. Keep a record of all communications and follow up to ensure that your request is processed.
• Explore local insurance options: When you emigrate, research and understand the local insurance options and requirements in your new country of residence. Each country may have different regulations and offerings when it comes to life insurance. Familiarize yourself with these options to make an informed decision about your financial protection.

Frequently asked questions