The process is usually straightforward. Here are the steps to follow:
1. Assess your decision
Take a moment to think about whether cancelling your life insurance is the right move for you. Once you cancel, all the premiums you've paid will be for nothing, unless you're still within your cooling off period (this typically only lasts for the first 30 days of your policy though).
If you plan to take out a new policy, keep in mind that if you've developed any health issues since you last took out cover, it will likely impact how much you pay. You'll also likely be charged more than before because you're older.
2. Notify your insurer
Once you've made up your mind, inform your insurer. Life insurance cancellations typically require written confirmation, rather than just a phone call. Your insurer should provide a cancellation form or link on their website.
3. Fill out the cancellation letter
Complete the necessary details in the provided cancellation letter. Once done, submit the letter to your insurer for processing.
Five things to consider when cancelling
Refunds within the cooling off period. You can cancel your cover within the specified cooling-off period and the premiums you have paid will be fully refundable.
Refunds after the cooling period. Premiums will not be refunded after the cooling period or if a claim has been made during the cooling-off period.
Cancelling at anytime. You can cancel your policy cover at any time, however, the premiums you have paid to date will not be refundable.
Refunds for policies in advance. If you pay your premiums in advance on a yearly basis, the coming year may be refundable minus any cancellation fees and stamp duties that are applicable.
Request in writing. You will be required to provide your request to cancel your policy in writing.
Life insurance inside your super
I cancelled the life insurance inside my super when I was young for multiple reasons. I got a standard life insurance policy instead because it was better value for money for me.
Many people do cancel their policies intentionally or due to non-payments. Some of the key reasons people cancel their policies include:
They can no longer afford premiums that increase with age
Insurers redesign the definitions and exclusions which increases the price
You move overseas permanently and prefer to have coverage with an insurer based in that country instead.
Should I cancel?
No one should ever feel like they are being weighed down by premium payments for insurance they do not need. Before cancelling, however, consider the following:
You may need life insurance in the future. Remember that your needs and circumstances change over time. In later years it may be more difficult to get a new life insurance policy. Your age and current health conditions are two important factors that determine the level of premiums you pay. The older you are the higher your premiums will be, with an increased chance of paying additional loading for new medical conditions. The cost of life insurance increases dramatically after the age of 45. By age 60 your premiums will be about six times higher than when you were 40
How much have you paid premiums already? Cancelling life insurance won't result in a premium refund. This could mean loosing thousands of dollars you have already invested into a policy.
Would your dependents be financially secure without you? Consider how your family would support themselves if you were to suddenly pass away. Are your savings enough to cover mortgage repayments, daily living costs, education, health insurance, funeral costs and everything else?
How to pay less by restructuring or switching your life insurance policy
If financial strain is your main reason for closing a life insurance policy, consider reducing, restructuring or even switching policies instead. This can give you a more affordable policy without surrendering all cover and losing any benefits or discounts you may have accrued. Some of your options include:
Reduce your sum insured. Reducing the amount of cover can help you save big, but before doing so consider having a full medical examination. If something potentially serious comes up then reducing the sum insured might be risky. Changing insurers would also be difficult as they might require further medical testing and may raise premiums even higher in response.
Change your indexation rate. Most life insurance premiums will be indexed for inflation at a minimum rate of 5% a year, but you can request a lower indexation rate from your insurer. This can lower premiums, but means your coverage will not be keeping up with inflation and may be worth less if you make a claim.
Decrease your benefit period. This can also lower premiums significantly. This is the maximum amount of time a policy will pay out in the event of disablement or loss of income.
Why you can trust Finder's life insurance experts
You pay nothing. Finder is free to use. And you pay the same as going direct. No markups, no hidden fees.
You save time. We spend 100s of hours researching life insurance so you can sort the gold from the junk faster.
You can trust us. We say it like it is. We aren't owned by an insurer and our opinions are our own.
Frequently asked questions
A refund will depend on whether or not you've passed an insurers cooling off period. The cooling off period only typically lasts for around 30 days after you take out cover.
If the policy is cancelled within the cooling-off period, you're entitled to get a refund on the premiums you have paid to date (provided that you've not made a claim). You won't be able to get a refund if you're outside the cooling off period.
Cooling off periods are grace periods that allow you to assess your insurance needs to make sure the policy you have at hand matches your circumstances and they often vary between providers, and are generally between 14 days up to 30 days.
If you want to switch to a new brand, make sure both insurers allow for policy transfers. Keep in mind though, if you switch, the new insurer will assess you based on your current health. If you've developed any pre-existing conditions, you might not be covered for them.
Gary Ross Hunter is an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio
Gary Ross's expertise
Gary Ross has written 739 Finder guides across topics including:
Willam Eve is the country manager for Finder's Canada operations. He has previously held the positions of group publisher of insurance for Finder Australia and lead publisher for the Finder global team. William has a Bachelor of Communications from the University of Technology Sydney, Australia. He loves the challenge of launching Finder into new markets while helping grow Finder’s global team. See full bio
Life insurance can be bought directly from an insurer. Learn about the benefits and a few watch outs you should be aware of.
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You pay nothing. Finder is free to use. And you pay the same as going direct. No markups, no hidden fees.
You save time. We spend 100s of hours researching life insurance so you can sort the gold from the junk faster.
You can trust us. We say it like it is. We aren't owned by an insurer and our opinions are our own.