Managing The Cost of Your Premium During Financial Hardship

It is not uncommon for your economic circumstances to change during uncertain times due to the loss of a job or having to work reduced hours. As financial hardship may be temporary, using the suspending of cover benefit could be a good alternative to cancelling your policy.

The suspending of cover benefit is typically a good option as it might be more expensive to apply for a cover again when you’re older or after you’ve experienced a change in your medical history.

How do I use this benefit?

If you wish to suspend your cover, the owner of your policy will need to inform your life insurer in writing within 30 days of your next premium due date. Insurance companies that offer premium holidays only request that you fill out a form and send it through to them, so they can action it. You generally won’t need to provide proof/evidence of financial difficulty, as you are not covered during this time.

If you wish to reinstate your cover, you must again inform your life insurance company in writing. In some cases, if you do not ask for your cover to be reinstated within the 12 month period, your cover may be cancelled.

What other options are available to me to make my cover more affordable?

Other options available to make life insurance more affordable include freezing your premiums or reducing your level of cover. If you need further assistance finding an affordable policy, seeking professional advice from a qualified adviser could be beneficial for ensuring that you get the best possible deal for your personal requirements.

1. Freeze Premiums

If you are on stepped premiums for your life insurance policy, you have the option to freeze your premiums so that they will remain the same each year instead of increasing due to advancing age. Opting to freeze your premiums can save you money in the long run as it allows you to pay the same amount for your life insurance, however it’s important to remember that the level of cover will reduce each year to compensate for the increase in risk you present as you get older.

2. Remove CPI Increases

To keep your policy in line with inflation, your level of cover will automatically increase by the rise in the Consumer Price Index or by a set percentage each year. You can opt out of this increase if you wish, which may make your premiums more affordable. Typically, you’ll be given the option to opt out of a CPI increase for one year, or permanently.

3. Reduce your Level of Cover

Reducing your level of coverage can be a great way to keep life insurance policies more affordable. By doing so, you’ll generally be able to lower your monthly premium payments. When reducing your level of cover, it is important to weigh out the risks and make sure that the cover you do have is adequate for what you need it for.

4. Review Policy

If you’ve stopped smoking or became healthier it might be worth asking your insurer to review your policy for possible better rates. Alternatively, shop around and compare similar policies in the market and see which ones offer the same type of cover at more affordable prices.

5. Payment Plans

Select insurers might offer to push your premium payments back as long as it is within the lapse period. Giving you a month or two to get back on your feet and then catch-up on the outstanding payment(s).

6. Fund from your Super

You might want to consider taking out life insurance through your Superannuation as it could be more cost effective.