What Happens If You Cancel Your Insurance?
- Price-Milne Financial Services Staff Writer
- Feb 6
- 3 min read
When money gets tight, insurance can feel like an unnecessary expense, until the moment you need it. If you’re considering cancelling your insurance to save money, it’s important to understand the potential financial consequences and alternative options available. Whether it’s life insurance, income protection, or health cover, cancelling can leave you exposed to significant risks. Here’s what you need to know before making that decision.
Immediate Loss of Cover
When you cancel your insurance, your cover stops immediately (unless you’ve set a future cancellation date with your provider). This means if something happens the day after cancellation, like a car accident, an illness diagnosis etc., you’ll have no financial protection.
For policies like life insurance or income protection, this could be particularly risky if you have dependants, debts, or ongoing financial commitments.
Reapplying Could be Tricky
If you cancel your insurance and later decide to take out a new policy, you might face:
Higher premiums – Insurance costs generally increase with age, so reapplying later could mean paying more for the same level of cover.
Exclusions or loadings – If your health has changed, insurers may apply exclusions (conditions they won’t cover) or loadings (higher premiums for increased risk).
Waiting periods – Some policies, like health or income protection insurance, have waiting periods before you can claim.
Declined application - if your health has deteriorated in any way since you applied for your previous cover (or if you become ineligible later), then this would be the worst outcome.
In short, cancelling now could make it harder and/or costlier to get covered again in the future.
Potential Financial Impact
Cancelling insurance can seem like a way to cut expenses, but consider the potential long-term financial impact:
Medical bills – Without health insurance, private healthcare costs can quickly add up.
Loss of income – If you cancel income protection and become unable to work due to illness or injury, you may have to rely solely on savings or government support.
Mortgage and debt risks – If you pass away without life insurance, your family may struggle to cover mortgage payments or other debts.
It’s important to weigh these risks against the short-term savings you might gain from cancelling.
Are There Other Options?
Before cancelling your policy, consider these alternatives:
Adjust Your Cover
Rather than cancelling, you may be able to reduce your premiums by:
Lowering your cover amount.
Increasing your excess (for health insurance).
Reviewing policy add-ons that you may not need.
Suspend Your Cover
Not all providers will allow this, and those who do will have certain criteria. You should talk to your adviser about this option. Suspending your cover means you do not need to pay premiums for a predetermined length of time, but the risk is you are often not covered during this break period.
Compare Other Providers
If affordability is the issue, talk to an adviser about what else is available in the market. But always be aware that if you end up applying for insurance at another company, see above for why reapplying for insurance might be tricky. You should always consider the coverage of a new policy, as well as its price, and avoid the pitfalls.
Think Before You Cancel
Cancelling insurance can leave you vulnerable to financial hardship when unexpected events occur. Instead of making a hasty decision, take the time to review your options and consider speaking with an insurance adviser.
If you’re unsure about your current cover or want to explore different options, check out Seek Cover’s Personal Insurance page to understand what’s available. You can also start reviewing your options with a professional by visiting our Get Started page.
The information in this article is general information only and is not intended as financial, medical, health, nutritional, tax or other advice. It does not take into account any individual’s personal situation or needs. You should consider obtaining professional advice from a financial adviser and/or tax specialist, or medical or health practitioner, in relation to your own circumstances and before acting on this information.
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