Cancelling Income Protection and Cooling-Off Period: Understanding Your Options

At a glance:

• Australian law offers a cooling-off period for income protection policies, typically 30 days. You can cancel within this time for a full refund, minus fees.
• Review your policy details during the cooling-off period, then contact Aspect’s customer service to cancel. They’ll assist you with the process and necessary forms.
• Consider drawbacks before cancelling, especially if you have pre-existing conditions. Obtaining affordable coverage later may be challenging, risking income protection in case of illness or injury.

Income protection insurance provides financial security in the event of illness or injury preventing you from working. However, there may be situations where you decide income protection isn’t the right fit. Understanding your cancellation options, particularly the cooling-off period, is crucial in making informed decisions about your insurance coverage.

What is the Cooling-Off Period?

The cooling-off period is a grace period mandated by Australian law that allows you to cancel your income protection policy and receive a full refund (minus any potential administrative fees) after you’ve received the policy documents. It’s a trial period to review the policy details and ensure it aligns with your needs. For the exact duration of your cooling-off period, it’s best to refer to Aspect’s Product Disclosure Statement (PDS) for your specific policy. Generally, it’s 30 days, but it can vary slightly depending on the insurer.

The cooling-off period typically starts on the latter of two dates:

• The day you receive your policy documents.
• The day your cover officially starts.

This timeframe allows you to examine the policy details thoroughly, including:

• Benefits: The specific types of illnesses or injuries covered and the extent of income replacement provided.
• Exclusions: Any circumstances or conditions under which the policy wouldn’t pay out a benefit.
• Premiums: The regular cost of maintaining your policy coverage.
• Waiting Periods: The timeframe that must elapse after an illness or injury before benefits commence.

By reviewing these details within the cooling-off period, you can ensure the policy aligns with your expectations and financial needs. If, after careful consideration, you decide the policy isn’t the right fit, you can cancel and receive a full refund.

How to Cancel Income Protection Insurance Policy?

Cancelling your income protection policy during the cooling-off period is a straightforward process. Here’s a detailed breakdown of the steps involved:

1. Scrutinise Your Policy Documents: Review your policy documents thoroughly, including the PDS and any supplementary information booklets. This meticulous review ensures you fully grasp the terms and conditions of cancellation, including any exceptions or potential administrative fees that might apply.
2. Contact Aspect’s Customer Service Team: Contact Aspect’s knowledgeable customer service representatives. They are well-equipped to guide you through the cancellation process and provide you with the necessary forms to complete.
3. Submit the Cancellation Request: After receiving the cancellation form, meticulously complete it following the instructions. Ensure you retain a copy of the completed form and any confirmation emails for your records.
4. Return Policy Documents (Optional): While only sometimes required, some insurers might request you to return the original policy documents upon cancellation. Always double-check with Aspect to confirm if this applies to your situation.
5. Refund Processing: Once your cancellation request is processed, you’ll receive a full refund minus any applicable administrative fees for the premiums you’ve paid. The timeframe for receiving the refund can vary depending on your bank’s processing time.

Important Considerations Before Cancelling

Before deciding to cancel your income protection policy, even within the cooling-off period, it’s crucial to weigh the potential drawbacks:

• Challenges Obtaining Future Coverage: Cancelling an income protection policy, particularly if you have pre-existing health conditions, can make securing affordable coverage later more challenging. Your health or age at reapplication could significantly impact your eligibility or premium rates.
• Loss of Income Protection Security: Cancelling your policy exposes you to financial hardship in case of an illness or injury that prevents you from working. Income protection helps replace some of your income during such times, ensuring you can maintain your financial well-being. Consider the peace of mind and security this protection offers.
• Understanding Exclusions: Meticulously review your policy for any exclusions that may limit your coverage under specific circumstances. Understanding these exclusions beforehand helps you make an informed decision about cancellation. If you have any questions regarding exclusions, please contact Aspect for clarification.

Will You Get a Refund if You Cancel After the Cooling-Off Period?

While the cooling-off period guarantees a full refund under most circumstances, cancelling your policy after this grace period typically doesn’t entitle you to a full refund. Aspect’s PDS will outline the standard practice for cancellations outside the cooling-off period. There may be a partial refund based on the premiums paid and the duration of coverage. However, some insurers may charge cancellation fees or deduct forfeited premiums, depending on the specific policy terms.

Are there any fees associated with cancelling during the cooling-off period?

Generally, there are no fees associated with cancelling during the cooling-off period. However, some insurers might have a small administrative fee. It’s best to check Aspect’s PDS or contact them to confirm.

What happens if I cancel my policy after a claim?

If you’ve already claimed under your policy, cancelling it becomes more complex. Aspect’s PDS will detail the specific conditions for cancellation after a claim. It’s best to contact them directly to discuss your situation.

Can I pause my income protection policy instead of cancelling it?

Some income protection policies may offer a premium waiver benefit. This allows you to temporarily suspend your premium payments while your cover remains active, subject to certain conditions outlined in the PDS. However, this feature has limitations, such as a maximum suspension period and potential reinstatement fees. Contact Aspect to see if your policy offers a premium waiver benefit and discuss the specifics.

I want to switch to another policy. When should I cancel my existing coverage?

If you’re considering switching to a different income protection policy, it’s generally best to wait until your new coverage is confirmed before cancelling your existing one. This ensures you’re not left without any income protection during the transition period.

The cooling-off period provides valuable time to assess your income protection policy and ensure it aligns with your financial goals and risk profile. If you decide to cancel during this period, you can do so with minimal hassle and receive a full refund (minus any potential administrative fees). However, cancelling after the cooling-off period can have financial implications, and you may lose valuable protection. It’s crucial to carefully weigh the pros and cons before deciding.

If you have any further questions or need personalised advice regarding your income protection policy and cancellation options, contact Aspect’s friendly customer service team. They’re happy to help you make informed decisions about your financial security.