Everything you need to know about cooling-off periods in life insurance policies.
Cooling-off periods give you the chance to cancel a service after you’ve paid for it. Say you bought a life insurance policy after seeing an ad on TV, then realised you hadn’t done your research. If you’re inside the cooling-off period you can cancel the policy and find a better one without paying a cent.
Here’s how cooling-off periods can affect your life insurance policy.
What is a cooling-off period?
A cooling-off period is an important condition built into many different types of contracts, including everything from real estate sales contracts to life insurance policies. This period allows you to change your mind about a purchase or agreement without incurring any financial penalty.
It applies for a specified length of time from the start of a contract or the date of a purchase. If you choose to cancel a contract during that period of time you can do so without penalty and you’ll also receive a refund of any money you’ve paid.
The cooling-off period is designed to protect consumers against the risk of making a purchase or entering into a contract that isn’t right for them.
Example - Samantha
Samantha, 34, is a busy mum with three kids. One night she sees a life insurance ad on TV. The ad is quite persuasive and Samantha goes online, searches the company's name and buys their basic life insurance policy with her credit card.
A few days later Samantha decides to research a bit more about her policy. In doing so she realises she can get a better level of cover for a lower cost with another insurance fund. Thankfully Samantha's policy has a 14-day cooling-off period and it hasn't finished yet.
Samantha cancels her policy without any penalty and receives a full refund.
Cooling-off periods and the law
Cooling-off periods are an important protection under the Australian Consumer Law. If you enter into an unsolicited contract you have a right to cancel it without penalty during the cooling-off period.
In addition, each Australian state and territory has its own laws regarding cooling-off periods, so contact your local fair trading or consumer affairs body for more information.
How long are cooling-off periods in life insurance policies?
A minimum 14-day cooling-off period applies to most life insurance policies. However, cooling-off periods can differ from one insurer to the next, usually up to a maximum of 30 days, so it’s worth checking the PDS closely to get a clearer idea of how long you have to cancel cover and receive a full refund.
The table below shows the cooling-off periods of some popular life insurance policies.
How do cooling-off periods compare between brands?
|Brands||Cooling off period|
|BT||28 days from commencement date 23 days after you receive your documents|
|ClearView||Within 30 days of the earlier of:
|TAL Accelerated Protection||30 days|
|Zurich Futurewise||21 days|
|Zurich Wealth Protection||21 days|
|Zurich Ezicover||30 days|
|TAL Accelerated Protection||30 days|
|American Express||30 days|
Data taken from brand product disclosure statements on May 2017. Benefits, conditions and amounts are subject to change at anytime.
Cooling-off periods and unsolicited sales
Cooling-off periods are a legal requirement for unsolicited sales under the Australian Consumer Law. An unsolicited sale is when the service provider has initiated contact with you, such as through a telemarketing call, a door-to-door sale or a salesperson approaching you at a shopping centre.
The cooling-off period for individual consumers is 10 business days and you can cancel the contract within that time for any reason.
If you entered into a life insurance contract that you found by yourself (if you bought a policy online or called an insurance company yourself) this 10-day cooling-off period doesn’t apply. This means you’ll be bound by the terms of the life insurance contract, which may not have a cooling-off period.
I’m outside the cooling-off period and I want to cancel my life insurance
You have the right to cancel your life insurance policy at any time. However, if you cancel outside the cooling-off period that applies to your policy, chances are you will not receive any refund of your premium.
In some cases insurers may offer a partial refund if you’ve paid a full year’s worth of premiums in advance, but cancellation and stamp duty fees will usually apply. Learn more about cancelling a life insurance policy here.
Thinking of switching life insurance funds?
Cooling-off periods are particularly useful when you want to switch life insurance policies and get a better deal. But if you're outside the cooling-off period you can still switch to a new provider. Do your research before committing, and consider the following:
- Cover options. Is a new insurance policy giving you the right kind of cover, features and benefits?
- Age. As you get older, signing up for life insurance inevitably gets more expensive.
- Costs. Will the new policy save you money or cost you more? Your choice should also depend on your priority: do you want better life cover for your needs or are you more concerned with saving money?