Can You Pause Life Insurance Premiums During Financial Hardship?
Losing a job, taking parental leave or experiencing a sudden reduction in income can make regular expenses harder to manage. For eligible AIA Life Cover, the Suspension of Cover Benefit may provide a temporary option — but it is important to understand exactly what happens while your cover is suspended.
Under AIA's current Life Cover policy wording, an eligible life assured may suspend their Life Cover for up to 12 months following certain financial or employment events. No premium is payable during the suspension — but the Life Cover is also suspended, so qualifying claim events occurring during that period are not covered under the suspended benefit.
Why Would Someone Want to Pause Their Life Cover?
Insurance is generally intended to provide long-term financial protection, but household finances do not always remain predictable.
A period of parental leave, redundancy or reduced income can make it difficult to maintain all regular expenses. At that point, someone may consider cancelling their insurance to reduce costs.
The problem is that cancelling existing Life Cover can have longer-term consequences. If you later apply for new insurance, your age, health, occupation and other circumstances at that time may affect the cover available and the terms offered.
A temporary financial problem and a permanent cancellation are two very different decisions. Before cancelling existing insurance, it can be worth checking whether the policy provides any options for managing a short-term change in circumstances.
When Can AIA's Suspension of Cover Benefit Apply?
Under AIA's current Life Cover policy wording, the Suspension of Cover Benefit may be available when the life assured experiences one of several specified events, subject to the policy's eligibility requirements.
Parental Leave
The benefit can apply when the life assured goes on parental leave.
Leave Without Pay
AIA's wording includes going on leave without pay for any reason.
Unemployment or Redundancy
Becoming unemployed or redundant is one of the listed suspension events.
Reduction in Pay
The current wording includes at least a 20% reduction in pay, measured using the method specified by AIA.
Self-Employed Revenue Reduction
For someone who is self-employed, the current wording includes a 30% reduction in revenue, assessed using AIA's specified comparison.
Up to 12 Months
Where the policy requirements are met, eligible cover can be suspended for up to 12 months.
There Are Important Eligibility Conditions
This is the part that can easily be missed when the Suspension of Cover Benefit is described simply as the ability to “pause your insurance”.
You cannot simply stop your direct debit and assume your policy has been suspended.
Under AIA's current Life Cover wording, the premium type shown in the policy schedule must be Rate for Age for this benefit to apply.
AIA must also be notified within three months of the relevant suspension event, evidence of the event must be provided, and AIA must acknowledge the notification in writing.
The cover is suspended from the date set out in AIA's written acknowledgement.
How Does the Suspension Process Work?
A Qualifying Event Happens
For example, you go on parental leave, become redundant or experience one of the other events specified in the policy wording.
Check Whether Your Cover Is Eligible
The policy requirements need to be checked, including the premium structure shown on your schedule.
Notify AIA & Provide Evidence
Under the current wording, AIA must be notified within three months of the suspension event and supporting evidence must be provided.
AIA Confirms the Suspension
The cover is suspended from the date specified in AIA's written acknowledgement.
Premiums Stop — and So Does the Cover
No premium is payable for the suspended benefit during the suspension period. However, the Life Cover itself is also suspended.
The Cover Is Reinstated
At the end of an eligible suspension period of no more than 12 months, the benefit can be reinstated in accordance with the policy wording without further medical evidence.
What Happens If Something Happens While Cover Is Suspended?
No premium does not mean free insurance.
While the eligible benefit is suspended, no premium is payable for that suspended cover.
But AIA's policy wording also states that no claim under the suspended benefit is payable for a claim event that occurs during the suspension period.
A claim may only become payable where the life assured first meets the criteria for an eligible claim after the cover has been reinstated, subject to the policy terms.
This distinction is extremely important. Suspension preserves the ability to reinstate eligible cover under the policy's rules. It does not provide insurance protection during the suspension itself.
What Happens When the Suspension Ends?
A useful feature of AIA's current wording is that where the benefit has been suspended for no longer than 12 months, reinstatement can occur without the life assured having to provide further medical evidence.
However, the premium payable after reinstatement is based on AIA's premium rates at the time of reinstatement.
A Simple Example
A parent takes time away from work following the birth of a child.
Their household income temporarily falls and they are looking for ways to reduce regular expenses.
Rather than immediately cancelling their existing Life Cover, they check whether their AIA policy is eligible for the Suspension of Cover Benefit.
If all policy conditions are satisfied and AIA approves the suspension, the eligible cover can be suspended temporarily. They would not pay the premium for that suspended benefit during the suspension — but they would also have no claim entitlement under that benefit for a claim event occurring during that period.
Whether suspension is appropriate depends on the individual's circumstances. A household should understand the financial risk of temporarily having no cover before making the decision.
Suspending Cover Is Different From Cancelling It
These two options may both reduce an immediate insurance expense, but they are not the same.
Cancelling a policy ends the cover. If you later decide you want insurance again, a new application may be required and the insurer can assess your circumstances at that time.
An eligible suspension under AIA's policy is instead a temporary pause governed by the existing policy terms, with a pathway to reinstatement where the requirements are met.
Don't cancel insurance simply because money becomes tight without first understanding your options. Depending on your policy, there may be alternatives worth discussing before making a permanent change.
What Should You Check Before Suspending Cover?
Questions worth asking include:
- Does my particular policy include this benefit?
- Is my premium type eligible?
- Does my situation meet one of the specified suspension events?
- What evidence will AIA require?
- When will the suspension actually begin?
- Exactly which cover will be suspended?
- What protection will I have during the suspension?
- When will my cover be reinstated?
- What premium will apply after reinstatement?
- Can I afford the financial risk of being uninsured during the suspension?
Where Can an Insurance Adviser Help?
Policy benefits like this are a good example of why understanding your insurance involves more than knowing your sum insured and monthly premium.
An adviser can help you review the policy wording, understand whether your existing cover may be eligible, discuss the consequences of suspending or cancelling cover, and help you communicate with the insurer about the available options.
An adviser cannot change the insurer's policy terms or guarantee that a benefit applies, but can help you understand what the policy says and what information may be required.
Frequently Asked Questions
Can I simply stop paying my AIA Life Insurance premiums?
No. Simply stopping payments is not the same as using the Suspension of Cover Benefit. The eligibility and notification requirements in the policy must be satisfied, and AIA must acknowledge the suspension in writing.
How long can eligible AIA Life Cover be suspended?
AIA's current Life Cover policy wording allows eligible cover to be suspended for up to 12 months, subject to the policy requirements.
Do I pay premiums while the cover is suspended?
No premium is payable for the suspended benefit during the suspension period under the current wording.
Am I still insured while the cover is suspended?
No. The relevant cover itself is suspended. AIA's wording states that no claim under the suspended benefit is payable for a claim event occurring during the suspension period.
Will I need another medical assessment when the cover restarts?
Under AIA's current wording, cover suspended for no longer than 12 months can be reinstated in accordance with the Suspension of Cover Benefit without further medical evidence.
Can self-employed people use the benefit?
The current wording includes self-employed people who experience a 30% reduction in revenue, measured using the comparison specified in the policy, provided the other eligibility requirements are met.
Does every AIA Life Insurance policy qualify?
Eligibility should not be assumed. Among other requirements, AIA's current Life Cover wording states that the premium type shown in the schedule must be Rate for Age. Your individual policy and schedule should be checked.
Has your income changed or are insurance premiums becoming difficult to maintain?
Before making changes to existing insurance, it can be useful to understand the options available under your policy and what each decision could mean for your protection.
Talk to an Insurance AdviserThis article provides general information only and is not personalised financial advice. It is based on AIA's Life Cover policy wording available at the time of writing. Eligibility, policy benefits, premium structures, suspension conditions and reinstatement requirements depend on the individual policy and may change. Always check your current policy wording and schedule before making changes to existing insurance.