Have you ever wondered if you can get a premium refund if you cancel the trip or come home earlier than planned?
A premium refund is possible in certain circumstances but not all.
Cooling Off Period
All travel insurance policies have a Cooling Off Period. Some people refer to this as the “free look period”. It essentially allows you to change your mind about having bought the policy. This is a standard feature of the contract and allows you to cancel the policy within the specified time period with no questions asked and get a 100% premium refund. The Cooling Off Period typically runs for 14 days after the policy has been purchased. In some cases, the period may be 15 days or even up to 21 days.
There are a few qualifications though.
To be eligible for a 100% premium refund in the Cooling Off Period, the trip must not have started and you cannot have made a claim against the policy. If you have started travelling (ie the policy is in force) or you have made a claim, you are not entitled to cancel the policy and get a full premium refund.
Lets look at some reasons for this.
- You’ve made a claim
If you make a claim against the policy during the Cooling Off Period, the policy must remain in force so that the insurer can process your claim. If you cancel the policy and ask for your money back, there is no insurance in place to compensate you for the loss you have sustained. No premium = no policy = no claim.
- You’ve started travelling
The Cooling Off Period is a specified timeframe in which you can change your mind and cancel the contract at no cost. If you start travelling during the 14 day Cooling Off Period, you are considered to have accepted the terms of the contract and the Cooling Off Period is waived. Once you start travelling, the insurance company is “on risk” which really just means they are providing you with full cover under the terms of the policy you purchased.
If you cancel the trip before departure but after the Cooling Off Period, it is unlikely the insurer will provide a full premium refund. They are under no legal obligation to do so. In some cases though, an insurer may agree to provide a pro rata refund – depending on the circumstances.
Early Return Home
Sometimes, you have to come home earlier than planned leaving part of your policy period unused.
In this case, it is unlikely the insurer will offer you a refund of the premium paid.
Many policies simply state that the policy ends on the date noted on the certificate of insurance or the date you return home (whichever occurs first). In this case, cover under the policy terminates and all premium is considered “fully earned” – ie is non-refundable.
Some insurers will provide a pro rata refund of the unused premium but this is subject to their own underwriting guidelines and at their discretion. This is something you would need to discuss with your chosen provider.
If you cancel the trip and make a claim, you will ask the insurer to reimburse you for the cost of the forfeited trip, right? What about the policy premium – can you include this in the claim?
Some people think they can claim the premium as part of a cancellation claim. Their reasoning for this is that they wont need or use the policy because they wont be travelling.
This is not correct – if you make a claim against the policy for cancellation of the trip, you are using the policy. Therefore you cannot claim the premium – it is the amount you paid to the insurer for it to cover your trip.
If the insurer refunds the premium to you, the policy will no longer be in force and they cannot then consider a claim against it. It is an either/or situation – you EITHER obtain a refund of the premium paid and in which case the policy ceases to exist OR leave the policy in force so that the insurer can consider your claim against it for the cancellation of the trip.
Similarly if you come home early and make a claim for the forfeited part of the trip, you cannot claim the premium paid for the “unused” period of insurance. If you make a claim, the insurer will consider the premium has been “fully earned”.
Premium refund entitlements are usually explained in the Product Disclosure Statement so make sure you read this to make sure you understand your options. All policies will include a Cooling Off Period during which you can cancel the policy and obtain a full refund (provided you have not started travelling or made a claim). Refunds outside the Cooling Off Period are subject to each provider’s discretion and there is no harm in asking if you do come home early or need to cancel outside the Cooling Off Period.