Cooling-off period

If you have signed a contract of any kind, be it for a bond, car or a new phone, you will have come across the term cooling-off period. This is designed to protect you as the customer. It is to give you an allocated amount of time to read and understand what you are agreeing to, with the outcome that should you not be pleased with the life insurance policy that you have taken out, you can cancel it.

Craig Baker, CEO of MiWayLife, says, “the general time frame is a 30-day cooling-off period. Should you cancel the policy within the cooling-off period you will receive a refund on any premiums that have been paid until the time of cancellation. It is important to read your insurers terms when it comes to the cooling-off period as there could be exclusions that can affect this.”

You won’t be able to receive a refund of your premiums if you have already claimed any benefits for the policy from an insurer as this is a loss to the insurer.

Waiting period

It is common for many people to confuse the cooling-off period with the waiting period, but these are two different things. A waiting period is a time frame in which you must wait before you can claim or have an insurance benefit paid out. This will differ from insurer to insurer but is usually stated in the policies terms and conditions.

“If you take out a life insurance policy and insure additional lives such as your spouse, children, or extended family members you are looking at a 6-month waiting period. What this means is that you will only be able to claim from your policy 6-months after the date in which your policy was in effect. The same will go for the accelerated funeral benefit,” says Baker.

Most insurers will have a waiting period of 24-months on covering suicidal deaths to decrease the chances of scammers looking for a way to get a quick payout. Always remember to check the inclusions and exclusions that come with your policy which tend to list the waiting periods.

Key differences to remember

COOLING-OFF PERIOD

• Designed to give you time to understand your policy and what you are agreeing to.
• You can cancel within 30 days
• Depending on your insurer you will be able to receive a refund on your premiums should you cancel within 30-days.

WAITING PERIOD

• It is a time frame that you need to wait before you can claim from it.
• Time frame in which you will be able to claim varies from 6, 12, to 24 months.
• Should you cancel your policy you will not receive any refunds on your premiums you have paid up until the point of cancellation. Your policy will remain active as long as you pay your monthly premiums.