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Living with a policy · Ring IV

Cancelling, changing or replacing a policy

Under the Life Insurance Code of Practice, a new policy comes with a cooling-off period of at least 30 calendar days from the day it is issued, during which you can change your mind and get a full refund (unless the cover is designed to last 3 months or less). After that you can still cancel: the Code says the insurer will not pressure you to keep a policy you no longer want, and if the policy terms mean it owes you a refund, it sends the money within 15 Business Days.

General information, not advice. Cancelling or replacing cover can leave you without it, and only advice about your own situation can tell you what suits you; a licensed financial adviser can give that advice. Your policy’s product disclosure statement sets out its own terms, and the Code sets out what subscribing insurers promise.

The cooling-off period

The Code says the insurer tells the policy owner about the cooling-off period when the policy is taken out. Before that period ends, it also sends documents that set out, among other things, the types of cover, how much you are insured for and the premium, how premiums are structured and change as you get older, any exclusions or waiting periods, the cooling-off period itself, and the claims and complaints processes.

So the cooling-off period is the window in which the policy’s own papers arrive and can be read against what you expected. For some funeral insurance policies that ask little or no premium at first, the Code says the cooling-off period runs from the day you pay the first full premium.

Four ways a policy ends or changes

Drawn from the Life Insurance Code of Practice and Moneysmart.
What happensWhat the sources say
You cancel within the cooling-off periodA full refund if you change your mind within the period, which is at least 30 calendar days from the day the policy is issued; for cover designed to last 3 months or less, the refund follows the policy terms.
You cancel laterAny refund depends on the policy terms; if one is owed, the insurer sends it within 15 Business Days. The insurer will not pressure you to keep the policy.
The insurer cancels for unpaid premiumsMoneysmart says an insurer can cancel when premiums are not paid and you have been told in writing that this may lead to cancellation. The Code says the insurer will tell the policy owner if there is an option to reinstate the policy; where reinstating is at its discretion, it may ask for more information.
Cover in super stopsCover in super can end under the law and under a fund’s own rules, as set out in Moneysmart’s guide to insurance through super.

The Code’s cancellation clauses do not apply to group policies, such as cover through super or an employer, because the group policy owner is responsible for telling members about changes. For cover through super, the fund is the place to ask. The Code’s clauses on buying a policy, from 4.2 to 4.32, which include its cancellation and replacement clauses, apply only if the insurer underwrote your application for cover.

Replacing one policy with another

If you apply for a new policy and tell the insurer you are replacing an existing one, the Code says the insurer will tell you not to cancel any existing cover until it accepts your application. It also explains the general risks of replacing a policy, which the Code names where relevant:

  1. Losing benefits you have built up. The Code calls this the loss of any accrued benefits.
  2. Waiting periods starting again. A new policy may come with its own waiting periods.
  3. Errors in the new application. The Code lists the implications of any errors or omissions in your new application as a risk in its own right.

The same risks appear each year: the notice your insurer sends before each policy anniversary includes the risks of cancelling and replacing your policy. Inside super, Moneysmart notes that if you are over 60 or have a pre-existing medical condition, you may not be able to get the cover you want, so it suggests checking your insurance before changing funds or closing an account. When you do change funds, you usually keep the existing insurance until the replacement policy is issued and the new cover confirmed.

Changing cover instead of ending it

If you tell the insurer, or it identifies, that you are having trouble paying because of financial hardship, the Code says it will contact you about its flexible options to help you keep cover. Some of the options it names:

Less cover, lower premiumChanging your benefits or the amount you are insured for, to reduce the premium.

A pause in premiumsNot collecting your premium for a short time, though you may not be able to claim for anything that happens, is diagnosed or becomes apparent during that time.

A claim moved upPrioritising a claim for an illness or injury your policy covers.

If you take up an option, the insurer explains its effect on your policy, including any reduction in cover and how long the support lasts, and contacts you before it ends to explain what that means. It only asks for evidence it reasonably needs, which could include Centrelink statements, bank statements or a statement that your employment has ended. These hardship clauses do not apply to group policies.

When a policy was sold badly

If an insurer finds that its staff, representatives or distributors used an unacceptable sales practice, such as pressure selling, the Code lists how it may put things right, depending on the circumstances. The remedies include saying sorry, cancelling the policy with your agreement, refunding premiums and paying interest on them, adjusting your cover or arranging more suitable cover with your agreement, correcting information, and honouring a claim. You can ask the insurer to review a proposed remedy, and if you are unhappy with the outcome of that review it is treated as a complaint. How complaints work is in when something goes wrong.

Questions the sources suggest asking first