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Free Look Period in Life Insurance

Life insurance is a legal agreement that mentions the rights and responsibilities of the life assured and the insurer. With the increase in the penetration of insurance products, the IRDAI has some rules for a free look period in the life insurance industry. This facility is provided to ensure protection of consumers while buying plans. Learn more about what is free look period and its purpose:

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What is the Free Look Period in Life Insurance?

The free look period is the time given to life assured to check and review the policy documents. The policyholder has the option to cancel the life insurance plan during the free look period if he/she is not satisfied with the T&Cs and features of the policy which were informed at the time of buying plan.

The free look cancellation time is generally upto 15 days of issuing the policy. But the insurer can extend the free look period upto 30 days as per the T&Cs. This feature allows canceling your life insurance plan within a specific timeframe by contacting your insurer. Now, let’s understand the purpose:

What is the Purpose of a Free Look Period In a Life Insurance Plan?

The free look period is a consumer-friendly feature designed to help you make an informed decision when purchasing an insurance policy. It serves several important purposes:

  • Review Time: The free look period provides ample time to thoroughly review the policy documents. During this period, you can fully understand the terms and conditions before committing to a long-term investment.

  • Cancellation Option: If, after reading the policy documents, you find certain terms or conditions unacceptable, you have the option to cancel the policy. This period allows you to reconsider your decision without financial penalty.

  • Protection Against Mis-selling: Despite insurers disclosing terms and conditions, agents sometimes sell policies that may not suit your needs. The free look period allows you to return the policy if you find the terms unfavorable, without incurring extra charges.

  • Clarification Opportunity: This period also provides a chance to clear any doubts or confusion about the policy, ensuring you fully understand what you're signing up for.

To ensure you understand the policy and make the best choice, insurance companies offer a free look period. This feature is designed to give you the confidence and peace of mind needed when making an important financial decision.

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How Does a Free Look Period in Life Insurance Work?

  • Life Insurance is an insurance plan that grants certain responsibilities and rights to both the policyholders and insurers.

  • Simply put, a policyholder receives the benefits stated in the policy documents after paying premiums as mentioned.

  • If the T&Cs of the policy does not match his/her requirements, he/she has the option to cancel the policy during the free look time.

  • In addition to this, different insurance companies follow different pre-specified criteria to return the paid amount.

  • Then, he/she can use the free look time in life insurance by asking questions and clarifying doubts to the insurance company chosen by you.

  • If the insured is still not convinced with the policy, he/she can request for cancellation.

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Can I Cancel My Life Insurance Policy During the Free Look Period?

As already discussed, while reviewing the policy document, if a policyholder finds any type of inconsistency or discrepancy in the policy’s T&Cs or if he/she is not satisfied with the features and benefits of the plan, then he/she can choose to cancel the policy and receive a refund. Also, called a free look cancellation.

So this means Raj, being a financially smart person, already knew about the free look period. On the very next day, Raj filed for the cancellation of the policy and got a refund.

Duration of a Free Look Period In a Life Insurance Plan

The term of a free look period in life insurance is generally 15 days. If in case the plan is bought online, free look periods can go up to 30 days after receiving the documents of policy. In some cases, some banks also provide an additional free look period for senior citizens. If a life assured wants to terminate the plan during this time, they have to check for all the important documents before filling out the cancellation form.

Life Insurance Policy Cancellation Process During Free Look Period

As mentioned earlier, a policyholder can terminate the life insurance plan if it does not match the requirements. In case of cancellation of a life insurance plan, one needs to convey this information to the insurer. Then, their agent will generally provide some alternatives that can suit. However, if one still does not wish to keep the plan, he/she is just required to fill out the cancellation application from the official website of the insurer’s branch.

After submitting the cancellation form, the request is processed. Before filing the cancellation request, the policyholder must ensure that he/she has the following relevant details:

  • The date on which he/she got the official documents of the policy

  • Contact information of the agent, if policy bought via an agent

  • Cancellation reason of the long tenure plan

  • Valid bank account to receive the refund

Will I Receive the Full Amount on Cancellation?

No. The insurer will deduct the following charges:

  • Taxes

  • Additional premium covered during that time

  • Additional loading/premium or riders (if available)

  • Medical examination charges incurred by the insurer

  • Processing or administration fee

  • Stamp duty charges

Step-By-Step Process To Cancel a Lifer Insurance Policy Within the Free Look Period

  • Check your eligibility for a free look period.

  • Request policy cancellation online or offline mentioning the reasons for cancellation.

  • After the cancellation request, you are required to submit the requested documents to start the entire process.

  • Then, after the application gets verified, the insurer will cancel your plan and refund the amount with some deductions.

What Happens if You Cancel Your Life Insurance Plan After the Free Look Period?

You still have the chance to end your life insurance plan after the free look time ends through a surrender. Generally, the premium rate is written off as surrender charges in case you cancel the plan in the 1st year. But, if you pay premiums before, the insurance company will deduct the premium amount of insurance coverage duration and refund the remaining money.

Wrapping It Up!

A lot of times we see that people often got into miss-selling activities or purchase some life insurance plans under some wrong influence. So, using the free look period, one can save their earnings from getting stuck in a wrong plan that does not fulfill their needs.

FAQs

  • Ans. Yes. It is important to mention the reason for policy termination while filing a cancellation request in written form. The company will call the policyholder to provide alternative options. If he/she still wants to terminate the policy, he/she will receive a refund.
  • Q: Should I buy term insurance or life insurance?

    Ans: Whether you should buy term insurance or life insurance depends on your individual needs. If you are looking to secure your loved ones at affordable premiums, then term life insurance might be the right option for you. Whereas, if you are looking to buy a plan that offers financial security for the family as well as wealth creation, then life insurance might be a better fit for you. However, you should always take a thorough look at the policy details for a better understanding of the benefits offered.
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