Tab 5 of 6 · Cooling-off and cancelling
Cooling-off: fourteen days to hand a policy back
When general insurance is provided to you as a retail client, the Corporations Act gives you a right to return it within a 14-day cooling-off period and have the money you paid repaid, less some deductions the regulations allow. The right ends early if you use the policy, for example by making a claim, and the product disclosure statement must include information about any cooling-off regime that applies.
Where the right comes from
Division 5 of Part 7.9 of the Corporations Act sets the cooling-off rules. Section 1019A applies them to several classes of financial product provided to a person as a retail client, starting with risk insurance products. The Act defines risk insurance products to include general insurance products, the class that home, contents and car insurance belong to.
The Corporations Regulations define home building, home contents and motor vehicle insurance products for working out who counts as a retail client of general insurance. The regulations can also exclude particular kinds of product from the cooling-off rules. Regulation 7.9.64(1) of the Corporations Regulations excludes two that matter for general insurance: an interim contract of insurance (such as a cover note), and a risk insurance product of less than 12 months that is a renewal of an existing product on its current terms and conditions. The PDS for a policy must include information about the cooling-off regime that applies to it.
In order
How the fourteen days run
The policy is issued
Under section 1019B(3) and (4), the 14 days start on the earlier of two moments, both after the policy is issued, so the period can start later than the day you bought it.
Confirmation, or the fifth business day
The first moment is when you receive confirmation of the transaction, or it is made available to you through a facility. The second is the end of the fifth business day after the day the policy was issued or sold to you.
Fourteen days to notify
You exercise the right by notifying the insurer, in writing or electronically, or in another way the regulations specify.
The contract ends without penalty
Once you exercise it, the policy and any contract to acquire it are terminated from that time, without penalty to you, and the money you paid is repaid. The right holds even if the insurer is being wound up. The amount repaid is not always the full premium: for insurance, regulation 7.9.67 of the Corporations Regulations lets it be reduced in proportion to the part of the cover period that has already passed, by any tax or duty the insurer paid on issuing the policy and cannot recover, and for reasonable administrative and transaction costs (not commissions) that do not exceed the true cost of an arm’s length transaction.
- MonIssued
- Tue
- WedConfirmation
- Thu
- Fri
- Sat
- Sun
- Mon5th business day ends
- Tue
- Wed
- Thu
- Fri
- Sat
- Sun
When the right ends early
Section 1019B(5) says the right cannot be used after you have exercised a right or power under the terms of the product, or after your rights under it have ended. The Act’s own note gives two insurance examples:
- once you have made a claim under the policy, you can no longer return it; and
- for a policy covering only one week, the right cannot be used after that week ends.
The regulations may add other circumstances in which the right cannot be used.
A note on add-on car insurance
Add-on car insurance (products such as tyre and rim cover, generally offered by car dealerships) is a case Moneysmart writes about separately. For these policies, it says the cooling-off period is usually around 30 days, that you should get a full refund of the premium if you cancel within it, and that outside it you will usually get a partial refund and pay a cancellation fee.
After cooling-off
Cancelling later
| Situation | The Code’s commitment |
|---|---|
| Your policy allows cancellation with a refund | If you are entitled to a refund and cancel, the insurer returns the amount within 15 business days |
| You bought through an insurance broker | Different arrangements apply; the Code says to ask the broker about them |
| You pay by 7 or more instalments a year and one is missed | A written notice at least 14 calendar days before any cancellation for non-payment |
| The insurer then cancels for non-payment | A second written notice, either before cancellation or within 14 calendar days after it, confirming it |
| The policy renews automatically | At purchase and at each renewal, a reminder of the automatic renewal process and that you can opt out |
Whether a policy can be cancelled for a refund at all, and how that refund is worked out, is set by the policy: the Code’s words are that your policy “may allow you to cancel it and obtain a refund”. The PDS is where those terms live (see the PDS tab).
If a refund is disputed
A disagreement about a cancellation or a refund follows the same route as any other complaint: the insurer’s internal complaints process first, then AFCA. AFCA lists premiums that were incorrectly applied or calculated among the insurance issues it can consider. How that route works.