or call 1300 743 254 to speak with a specialist
Cancelling your life insurance policy
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NEOSThere are several reasons why you may wish to cancel your life insurance policy. You might be coming out of a long-term relationship, 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 after you inform your insurer of your intention in writing. Typically, you’ll be able to end your cover without incurring any additional costs. You may even get a refund if you withdraw during the cooling-off period or you’ve paid your premiums in advance.
Take the time to look at the alternatives and compare your options before deciding to proceed with the cancellation process.
When you cancel your policy, do you get a refund?
No, generally you won’t receive a refund unless you’ve terminated your cover during the mandatory cooling-off period or you’ve paid your premiums in advance. During the cooling-off period, typically between 14 and 30 days, your insurer may return any premiums you’ve already paid. However, this is only applicable if you haven’t made any claims.
Premiums for life cover won’t be refunded if you terminate after this period unless you pay your yearly premium in advance. In the case of advanced payment, you’ll typically receive a pro-rata refund on your insurance.
Alternatives to cancelling
Generally, it’s a good idea to explore your alternatives before stopping your life cover. You could look at switching to a different service provider or policy. Alternatively, you have the option to reduce the amount of cover you receive.
You could even ask your insurer about a price freeze or removing CPI increases from your premium. Otherwise, you could suspend your cover till you’re back on your feet.
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How to cancel your policy
- Step 1: Ensure you’re 100% certain you want to stop your policy by assessing your needs. Review your current financial responsibilities and ensure that you have enough money cover set aside to provide for your dependents. Your insurance should typically be enough to pay your outstanding liabilities and provide financial support for your loved ones.
- Step 2: Contact your insurer. You generally can’t terminate over the phone. However, you should call them to confirm you have the correct policy information and that you intend to end your policy.
- Step 3: Confirm your intention to terminate your cover in an official letter. You will generally be sent a confirmation letter once this has been actioned by the insurer, if you haven’t received this important to follow this up to ensure your request is actioned.
While it’s important to take your time to think about terminating your cover, the actual process is relatively simple. Generally, you won’t be charged any fees for ending your policy before the term has ended.
Writing a cancellation letter
Typically, you’ll need to include the following information in your letter:
- Your insurer’s name and the specific policy to be terminated
- The policy number
- The preferred end date for your coverage
- Policy owner (s) name
- Policy owner (s) signatures
- End with your contact details and your desire for a follow-up confirmation
Once your insurer has received your letter, they’ll generally keep you updated on the status of your policy.
Possible reasons for cancelling life insurance
There are several reasons why you might wish to cancel your life insurance. For instance, you may be getting married or divorced, or there’s been a change in your circumstances that require you to care for more dependents.
Alternatively, you may be immigrating or retiring, and you aren’t able to maintain your policy. Wanting to change policy or service provider or buyer’s remorse are also valid reasons to cancel.
When changing your policy or insurer, coordinate the end of your policy with the start of your new option to ensure continuous cover.
Pros and Cons of Life insurance
| The advantages of life insurance | Possible disadvantages of life insurance |
|---|---|
| Financial support: Helps your family cope with the economic impact of your death. | The monthly expense: Life insurance premiums are another monthly expense for households. |
| Tax-free benefits: Life insurance pay outs from personally held policies are usually tax-free when paid to your nominated beneficiaries. | The policy is only paid out after your death: You won’t necessarily be able to enjoy the benefits of the cover during your lifetime. |
| Change is easy: You can make reductions and certain increases to your policy based on your needs over time. | Your health affects your premiums: Premiums are generally based on the results of several factors like your age, the sum insured, and your medical history at the time you took out the policy. |
What happens when you cancel a life insurance policy?
There are several consequences that you need to consider before you terminate your life cover. These include:
- Losing your premiums: The premiums you’ve paid will be lost
unless you’ve cancelled during the cooling-off period or paid annual fees in advance in which case you’ll typically receive a pro-rata refund. - Financial vulnerability: Should you pass away, your family will be left with no cover to help with things like funeral costs, outstanding bills, mortgage payments, and their living expenses.
- New cover might be more expensive: If you decide to take out cover again in future, your premiums might be higher because you’ve gotten older and or your medical history may have changed.
- Replacing your policy: When applying for a new policy, you may be declined, or you might be subject to specific exclusions if your health has declined. Therefore, you shouldn’t stop any existing policies until you have a new policy enforced.
Frequently asked questions
What is the life insurance cooling-off period?
As a new policyholder, you’ll have 14 to 30 days to change your mind about your policy. This timeframe, known as the cooling-off period, varies with different insurers. Terminating cover during this period allows you to claim a refund of your premiums if you’ve not lodged a claim.Are there penalties when stopping your life insurance?
Typically, there are no penalties incurred when stopping your term life insurance policy. Your premiums will, however, not be refunded if you haven’t paid your yearly fees in advance or if you terminate cover after the cooling-off period.There are existing policy holders with old Whole of life or endowment policies that may have penalties. However, whole life policies are no longer available as the government made superannuation compulsory and they were replaced by term life policies.
Can life insurance be terminated because of illness?
No, your policy can’t be ended because of illness unless the policy is not guaranteed renewable. But, your insurer can cancel your policy due to non-payment or non-disclosure. Typically, as the policyholder, you have the right to end your cover for whatever reason.Is the life insurance provided by your superfund enough?
Generally, this depends on your requirements. However, you may find it more difficult to claim your insurance inside super as you’re typically required to meet your policies terms and conditions in addition to the SIS conditions of release.To decide whether it is the right option for you, ask yourself whether the coverage you have is sufficient protection for yourself and your family should you pass away or be unable to work because of illness or injury.
In RSA, how do I know whether I have a Term Life or Whole life cover?
Hi Shawn. Generally, you’ll need to contact your insurer and request updated policy documents to find out what type of cover you have. Be sure to have your policy number ready or proof of identity.
I want to cancel life insurance.
Hi Thabisile.
If you’re a client of ours, please give us a call on 1300 743 254 and a specialist will assist you with your request. If you’re not a client, please contact your insurer directly to cancel your policy. Be sure to have your policy number on-hand.
I want to surrender my policy please, due to family matters.
Hi Walter.
We’ve looked on our system, and it doesn’t seem that you are a client of ours. Please have a look at your policy schedule and contact your insurer directly to cancel your policy. Please note that term life insurance policies in Australia have no surrender value as it does not have a cash component linked to it.
Need to cancel my policy due to unforeseen circumstances.
Hi Nicolene.
Sorry to hear about your troubles. Please contact your insurer directly to cancel your policy. If you purchased a policy through ComparingExpert, call us on 1300 743 254 and a specialist will assist you.
Kindly note, you also have alternatives to cancelling. Ask your insurer if you can suspend your policy for a set period (you won’t pay premiums or have cover, but can generally continue your policy after the period). Alternatively, you can also reduce your coverage amount and thus reduce your premiums.
Best of luck.
Hi, my mum had accidental death insurance but died of a terminal illness.
I know accidental death doesn’t cover terminal illness but just wondering if there would be a refund for all the money she paid into it?
Hi Mel. I’m sorry to hear about your mom.
Term policies do not have a cash value component, so generally, no premiums get refunded. Unless your mom paid her premiums in advance, in which case the advanced payments could be partly refunded. It’s best to contact the insurer directly.
All the best.
Hi. I missed payments on my 2 life insurance policies and as a result of a telephone conversation with a SunLife advisor, I then paid in full and brought my 2 SunLife policies up to date and had them reinstated only to discover weeks later by way of a letter from SunLife that they cancelled my policies.
I feel this was totally unfair of SunLife to do this and I now would like a full refund of my payments on these 2 policies. I hope SunLife will respond to this. If not, I will take further action. I hope to move on from this and have my life covered by another insurance company whom I hope will be fairer when I’m paying my over 50,s policies and I can look forward to my life being covered by the new insurance company.
I’m sorry it has come to this with SunLife, whom I trusted. Here’s hoping to hear further on this matter ASAP.
Kind regards from Mr Andrew Charles McPhillips
Hello Mr McPhillips. I’m sorry to hear about your unfortunate experience.
Just as a precaution, you might want to first contact Sunlife as the letter they sent might have been on its way before you spoke with the adviser and thus could be dismissed.
However, if this is not the case, please contact the insurer directly to inquire about a refund regarding the premiums you’ve recently paid in. If you’re still wanting to compare other life insurance companies, perhaps our article about life insurance for over 50s will be of some assistance.
Best of luck.
Can I get my money back from my policy of 1 life insurance because I am not working anymore because of my health
Hi Nthabiseng.
Term life insurance policies in Australia have no cash-back component. Thus, if you cancel your policy, you will not receive any money back. However, if you paid your premiums in advance, you might be entitled to a refund of those premiums, minus any cancellation costs incurred. Please contact your insurer directly to enquire.
Do you get a refund if you cancel your funeral payment because you cannot afford them anymore?
Hello Patricia,
Generally, neither funeral or term life insurance will refund your premiums when you cancel your policy due to financial constraints. However, annual premiums, when cancelled are generally provided with a pro-rata refund for the remainder of the year, but it is always best to check with your insurer prior to cancelling.
Another option might to decrease your cover amount, thus making your premiums more affordable. Please give us a call on 1300 743 254 for assistance.
I’ve been off work. Can l get a loan from death insurance?
Hi Susan. Term life insurance has no cash value component and thus loans cannot be made from it. I wish you all the best.
I have had a life insurance policy with met life since 1997, term life USAA since 2003, another policy since 2003 with my state job, which I will retire from in 2 years. Which one do I keep?
Hi Nadie,
Because I’m not aware of the type or cover amount of your policies or you’re personal requirements, for example, do you have financial dependents, I cannot tell you which policy to keep. Please give us a call on 1300 743 254 and a specialist will help you with your decision.
Hi. My husband took out a life policy on me. Now we are going through a divorce. I don’t want it to lapse as I took over the payments. We both consent that if it’s possible, to give me ownership of the policy. Is this possible?
Hi Bagavathi,
Generally, yes it is possible to transfer ownership on a life insurance policy. Usually, the current owner, your ex-husband, will need to complete a memorandum of the transfer in which he nominates you as the new policy owner. He’ll need to contact the insurer to get these forms. If you have any questions or concerns regarding this process, please call us on 1300 743 254.
Dear sir
I had life insurance from 2006 and paid until 2016 May each month.
But Bussiness has gotten worse and I have not been able to pay my premiums since June 2016.
If I continue paying again from this month, will my policy continue and benefits still be available?
Please advice me.
Hi Inhwan.
Generally, if you do not pay your premiums in full within a certain amount of time (usually 60 days depending on the insurer), your policy will lapse. This means your insurance is cancelled due to non-payment and cover will cease.
Because so many months have based, you’ll usually need to purchase a new policy.
I have a $50,000 term life policy on my husband. I recently discovered what the insurance agent sold me was not what they had promised. So, I stopped auto payments and now they say if I pay past premium they will continue the policy with no other medical exam.
I had this policy for a little over 4 years, paid over $4,400 during this time, can I get my money back? Because the agent said my payments would never go up and that’s the highest amount I could get based on my income. I now know that in 7 years my monthly premium does go up and eventually the annual amount paid will exceed my annual income, is this legal? Help.
Hi Sherry,
I’m a bit confused, as I’m sure you must be too. You mention you have a term policy on your husband, but that the cover you got was limited because of your income. This sounds a bit strange.
Also, I wonder if your policy was on a level premium structure that then converts to stepped premiums. Please give us a call on 1300 743 254 so a specialist can help you find clarity and answer all your questions and concerns.
Usually, you won’t get a refund for premiums paid on a policy that you cancelled or that has lapsed (cancelled due to non-payment). However, please confirm this with our consultants as your particular situation might require investigation.