What happens if I can’t make a life insurance payment?

If your life insurance premiums are becoming too high, you have options.

You never know when you’ll need to make a life insurance claim, so it’s important to maintain active cover whenever possible. Unfortunately, circumstances change, new expenses arise and it’s not always possible to keep up with premium payments.

Three readily available options to consider include:

• Freezing your premiums
• Temporarily suspending your cover
• Reducing costs in other ways e.g. switching insurers

• What happens if I simply stop paying?

  If your premiums go unpaid for too long, you will lose your cover. If they continue to go unpaid, your policy will be cancelled all together.

• Should I just cancel my policy and look for one later on

  A common mistake is to cancel your life insurance policy when the cost gets too high. If you do this, it will probably cost more to sign up again later, because you’ll be older and might not be as healthy as you were before.

  The good news is that you don’t need to do this. Everyone’s financial situation will change from time to time, and insurers have several options to make sure you don’t need to cancel your cover.

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Name	Product	Maximum cover	Maximum Entry Age	Minimum Sum Insured	Guaranteed Future Insurability	Expiry Age	Short Description
Real Family Life Cover		$1,000,000	64	$100,000	No	No expiry age as long as premiums are paid	First month FREE when you take out Real Family Life Cover. Available for a limited time (T&Cs apply).	Get quoteMore info	Compare	loading Fetching your data...
ahm Life Insurance		$1,500,000	65	$100,000	Yes	99	Get life cover up to $1.5 million. Plus, ahm health members can save 10% off premiums.	Get quoteMore info	Compare	loading Fetching your data...
Zurich Ezicover Life Insurance		$1,500,000	69	$50,000	Yes	99	Receive a 10% discount on the second person when two applications are submitted at the same time, and both policies are issued.	Get quoteMore info	Compare	loading Fetching your data...
Virgin Money Tailored Life Insurance		$1,500,000	65	$3,000	No	80	Choice of cover options and flexible premiums to suit your budget. No lock-in contracts and fast application.	Get quoteMore info	Compare	loading Fetching your data...
nib Value Life Insurance		$1,000,000	65	$100,000	No	No expiry age as long as premiums are paid	Receive one month's premiums off every year if you pay annually upfront. T’s and C’s apply.	Get quoteMore info	Compare	loading Fetching your data...
Guardian Life Insurance		$1,500,000	64	$100,000	No	No expiry age as long as premiums are paid	Cover up to $1.5 million with Guardian Life Insurance.	Get quoteMore info	Compare	loading Fetching your data...

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What is a premium freeze?

A premium freeze is only available with stepped premium life insurance policies, where the cost rises with age. Applying for a premium freeze is generally as easy as filling out a form and sending it to your insurer.

How does a premium freeze work?

When frozen, your premiums will stop rising with age, for a set period of time. Typically it can last until you choose to cancel it, or make a claim or adjust your level of cover in some other way. You will still have to pay premiums but the price won’t increase with time, as long as it’s active.

What’s the downside?

• The main catch is that your cover won’t increase either, and you may become underinsured.
• Policies are often indexed for inflation, but typically won’t be for as long as your premiums are frozen.
• You might lose benefits like guaranteed future insurability depending on the policy terms and conditions.

Can I ‘unfreeze’ my policy later?

Yes. You can generally unfreeze your policy whenever you are ready, but certain conditions might unfreeze it sooner, depending on your policy. It may unfreeze when you make a claim, reach the next policy renewal date, change your sum insured or otherwise adjust your cover.

Should I freeze my premiums?

It might be the right option if your premiums are becoming unaffordable. However, there are downsides, so it’s a good idea to consider the other alternatives first.

Which insurers offer premium freezes?

Here are some of the brands on finder that offer premium freezes.

_{Note that premium freeze options will reduce your sum insured amount and might not be available in super policies. Data taken from brand product disclosure statements on May 2017. Benefits, conditions and amounts are subject to change at anytime.}

• General conditions

  General conditions

  • Will apply to stepped premiums
  • Sum insured will reduce
  • May not be available in super policies

How do I temporarily suspend my cover?

Functionally, suspending your cover is a lot like temporarily cancelling your policy, with the advantage of not actually needing to cancel it. Not all life insurance policies will include a suspended cover benefit, and where they do it may be variously known as a premium holiday, premium pause or other variation.

How does suspended cover work?

Unlike a premium freeze which merely stops premiums from increasing, this option means you stop paying premiums entirely. The downsides are also more severe. You will typically lose all your cover, and cannot make claims for anything that occurs while your cover is suspended.

Should I suspend my cover?

This will depend on your personal circumstances. Some examples where suspending cover might be a sensible cost-saving measure include:

• If you’re between jobs
• If you’re on long-term leave
• When you’re otherwise not earning your typical income

Note: You may be left without any cover if you suspend your premiums. This step should not be undertaken lightly, and it’s a good idea to consider the alternatives first.

Other ways to reduce costs

Life insurance policies are often more complex and multifaceted than others. This can make it more difficult to navigate, but also means there are many ways to reduce costs.

• Change your premium structure. Stepped, level and hybrid premiums have very different costs over time.

• Adjust your cover. Reducing your cover also reduces your costs.

• Share a policy. You can get a “bulk discount” with joint life insurance policies.

• Get fit. It’s easier said than done, but your overall health makes a major difference to life insurance premiums
• Shop around. It’s important to be aware of the downsides of switching life insurance policies, but it may still be worth considering. Whatever life insurance policy you have, it’s still only one option among many. Compare it side by side with other policies to see if you’re getting value for money.

For more details on ways to lower your premiums, and other options to consider, try going over our guide to reducing life insurance premiums.

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