How to Cancel Your Life Insurance

Find out more about how to cancel your life insurance policy here.

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, updated on July 10th, 2023       

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Life Insurance Banner - Young couple cancelling their life insurance policies

Having the right life insurance coverage can give you and your family peace of mind that you’ll be covered financially if you were to become injured or ill or pass away due to an included event. However, if you decide to step away from your insurance coverage, you’ll have to cancel your policy.

You can find out about how to cancel your life insurance policy right here with Savvy. Learn all you need to know, including what your alternatives to cancelling your policy may be, with us today.

How do I cancel my life insurance policy?

The process of cancelling your life insurance policy is a fairly simple one in most cases. The steps you’ll need to take are as follows:

Consider whether you need to cancel your life insurance

First of all, it’s worth taking the time to seriously consider whether cancelling your term life insurance or another type of cover is the right step to take for you. You should also think about the intent of your cancellation and whether you’re doing so to scrap your coverage altogether or switch to a new policy with a different insurer. If you’re doing the latter, it’s important to compare the options available on the market before you cancel your existing policy.

Contact your insurer to state your intention to cancel

Once you’ve decided to cancel your policy benefits, you’ll need to contact your insurer to let them know of your desire to cease your current coverage. While going through with this process isn’t complicated, one of the main cancellation rules for life insurance is that it can’t take place purely over the phone and must be confirmed in writing. Most life insurers will have a cancellation letter you’ll be required to fill out, which can be found on their website.

Complete your letter of cancellation and submit it

Once you’ve filled in the required information, it’ll simply be a matter of sending your cancellation letter to your insurer and receiving confirmation from them that your existing agreement has been voided. Once you receive this, your policy’s coverage will have ceased and you’ll no longer be required to pay your premiums.

When might I need to cancel my life insurance policy?

There are several situations where you might seek to cancel your life insurance policy. Some of the most common reasons why life insurance policies may be cancelled include:

  1. Premiums become too expensive: those who opt for stepped premiums over level premiums will see the cost of their insurance gradually increase over time, meaning you’ll pay more when you’re over 50 compared to when you’re 30. It could reach a stage where you’re either not able to comfortably support the cost of your premiums or simply decide the coverage your insurer offers isn’t worth the investment.
  2. Financial situation changes: regardless of whether you’ve opted for stepped or level premiums, major financial changes such as buying a house and switching to a lower-paying job could result in your premiums no longer being affordable for you.
  3. Moving overseas: you may decide to cancel simply because you’re moving to another country. If the move is intended to be permanent, you may prefer to have coverage with an insurer based in that country instead.

What are the alternatives to cancelling my life insurance?

If you're simply after better coverage, the main alternative to cancelling your current term life insurance policy altogether is to take the time to survey the market to find a better offer. Comparing a range of offers on the market can help you determine whether there are any policies available which offer the coverage you're looking for at a reasonable cost.

Some of the other options you have available to you instead of dropping your policy coverage include:

  1. Make sure you’re only paying for what you need: you may have purchased optional extras on your policy or included elements of coverage which are no longer required, such as if your children are no longer dependent or wish to take out their own coverage. Updating your policy to remove such add-ons can help you save overall.
  2. Reduce your sum insured: although this will reduce the potential payout you or your family would receive upon your death or terminal illness diagnosis, cutting down your covered amount will, in turn, reduce the cost of your premiums.
  3. Freeze your premiums: some insurers may allow you to freeze your premiums, which prevents their cost from rising over time as you age. However, by doing so, your sum insured will also be reduced.
  4. Suspend your coverage: in some cases, you may be able to suspend your coverage for a limited period without having to cancel it. This may allow you to get your finances back on track and resume your coverage at a later date when you’re more comfortable.
  5. Make lifestyle changes: because your premiums are partly based on your lifestyle at the time you purchased your policy, there are changes you can make to reduce your premiums further. The most significant change you can make is quitting smoking, while losing weight can also make a difference.

Common questions about life insurance cancellations

Will I have to pay a fee for life insurance cancellation?

There generally won’t be any requirement for you to pay a fee if you cancel your life insurance policy before its scheduled conclusion date. However, some insurers and policies may impose early cancellation fees, so it’s worth checking with your insurer and reading your PDS to determine whether you may be liable to pay anything upon cancellation.

Can I get a refund if I cancel the remainder of my life insurance policy coverage?

In most cases, no – you typically won’t be able to receive a refund if you cancel your life insurance policy early. However, if you pay your premiums annually and have already done so for the coming year, you may be able to receive a pro-rata refund.

What is a cancellation cooling-off period in life insurance?

A cooling-off period is a short period after you buy your policy where you can cancel your coverage and receive full reimbursement for any funds invested. Depending on your insurer, this period may last up to 30 days from the point you purchase your policy. However, if you make a claim within this period, you won’t be eligible for a refund.

What is life insurance indexation?

Life insurance indexation is the process of your sum insured increasing each year (typically by at least 5%) in line with inflation. This helps ensure your payout retains its value down the track. If you’re looking to cancel your policy because it’s becoming too expensive, however, you can request indexation at a reduced rate or have it removed altogether. This can help keep your premiums at a steady level, but it’s important to consider whether your payout will be enough in many years’ time.

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Through Savvy, you can consider a range of competitive life insurance policies from reputable insurers, whether you're after life, income protection, trauma or TPD cover. Get the ball rolling on comparing your available options today!

Disclaimer:

Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.

Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.

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