Important things to think about before cancelling life insurance
The events of the last two years have laid the groundwork for a very challenging economic environment. It is impacting on individuals, families and businesses alike. This may include significant life-changing events like redundancy, serious illness or death in the family or bankruptcy. But one factor is increasingly placing severe stress on families and businesses. This is the financial stress caused by high inflation and escalating interest rates as loan terms expire. It’s important to consider alternatives to cancelling life insurance policies.
In recent weeks I have heard of instances where mortgage repayments have increased by between $400 and $700 per week. This is leading policy owners to request the cancellation of their Life Insurance policies. This is a natural, emotional human response to a dire situation, especially where the possible loss of one’s home is a real possibility. However, cancellation of one’s Life insurance policy should only be considered as a very last resort after other options have been considered.
What are the alternatives to cancelling your life insurance?
While each mainstream Life insurance provider will have slightly different alternatives, one can consider options such as a premium holiday or a policy suspension.
A premium holiday may permit you to stop paying the total or partial premium while remaining fully covered for a maximum period of up to 6 months, following which premium payments recommence without the need for payment of the missed premium payments.
Policy suspension is an option that enables you to stop paying the total or partial premium and to suspend your cover for a period of up to a maximum of 12 months. You are not covered during the period of policy suspension. But, an important feature is that if and when you are able to resume paying the policy premium, you are not required to lodge a new, full application and nor are you subject to fresh medical assessment again. This is a huge benefit, as should a medical condition arise that would otherwise compromise or preclude a new application (if one had previously cancelled outright), following a period of policy suspension you are assured of resuming your original cover.
Naturally, there are “triggers” that enable these options to be taken up and terms that apply. But the most important thing to remember is that your insurance adviser is the first person you should contact if you are under financial stress. If you are considering cancelling your personal insurance policy, get in touch to discuss the alternatives to cancelling life insurance.
We also recommend taking sound advice and assistance from an experienced mortgage adviser at the very earliest stage rather than “going it alone”.
It’s what we do!
Theo Simeonidis
UProtectNZ Insurance Services