Managing The Cost of Your Premium During Financial Hardship

The Suspending Cover Benefit, also referred to as a Premium Holiday, is a great option for those who find themselves in financial difficulty. It allows policyholders to suspend their policy for a period of time and therefore not have to worry about making payments while they get back on their feet.

Published August 25, 2023

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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.

When can I suspend my cover?

Generally, if your policy has been active and paid for at least 6-12 months and you are facing financial hardship due to unemployment, maternity/paternity leave, or a drop in household income of more than 30% over the past 3 months, you may be eligible to suspend your cover.

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 are the benefits of Suspending Cover?

In times of financial hardship, suspending benefits on your life insurance cover can be a wise decision. This allows you to take a break from making payments on the policy and can help to free up resources that can be used for other more pressing matters. Before taking action, it’s important to consider the potential benefits associated with such an approach.

  • Suspension of cover and premiums for up to 12 months
  • Allows you to reinstate cover without serving any further qualifying periods
  • If you have multiple cover types, you may have flexibility to suspend one cover type and maintain another.

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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.

Important to note

It is important to note that while your cover is suspended, you will not be able to make any claim on your policy.

Frequently Asked Questions and Answers

  • What is the process for managing the cost of my premium during financial hardship?

    The Suspending Cover Benefit, also referred to as a Premium Holiday, allows you to suspend your policy for a period of time due to financial difficulties. This can help provide relief in managing premiums during times of financial hardship. The process of managing the cost of your premium during financial hardship is relatively straightforward.
  • What documentation do I need to provide to prove financial hardship?

    The process for managing the cost of a premium during financial hardship involves applying to your health insurance carrier for assistance. Generally, you will need to provide documentation to prove financial hardship, such as proof of reduced income due to job loss or reduced hours, proof of non-payment of rent or mortgage, recent tax returns, pay stubs, bank statements and other documents that can demonstrate your current financial situation. Your health insurance carrier may also require additional information depending on their specific requirements.
  • How long can I receive financial assistance?

    This typically depends on your insurer, you will need to ensure that you resume payment of premiums when you are able to do so, otherwise your policy may be cancelled or suspended by the provider. Furthermore, any reinstatement fees or additional charges may apply depending on the specifics of each policy.
  • How do I contact someone to begin the process to receive financial relief for my life insurance premiums?

    To begin the process for receiving financial relief for your life insurance premiums, you should contact your life insurance provider directly. Your provider will be able to provide you with the necessary information and guide you through the necessary steps needed to apply for any available assistance programs.

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