What is a Free Look Period?

Their first premium paid by the policyholder will be returned on policy cancellation, excluding net of applicable processing charges.

For example, if Ramesh buys a life insurance policy and receives the documents on September 1st, he has until September 16th to thoroughly review the policy terms. If he finds anything he doesn’t agree with or feels the policy doesn't meet his needs, he can return it for a full refund of his premium, minus net of applicable processing charges.

What is a Free Look Period in Term Insurance?

A free look period is a time frame during which customers are allowed to cancel their term insurance policy without paying any surrender charges. The insurer refunds your first premium amount if you return the term policy within this period, excluding the net of applicable processing charges. The The free look cancellation time is generally up to 30 days for online policies, whereas 15 days for offline policies, from the date of receipt of the policy documents.  

In simple words, a free look period is usually given to the customer to assess and review the policy documents. During this period, the customer can terminate the policy if they are not happy with the terms and conditions they were told about when they bought it. This term insurance benefit allows cancelling your term insurance plan within a specific time frame by contacting your insurer.

What is the Need for Free Look Period in Life Insurance?

Life insurance is a legal agreement that specifies the rights of the life assured and the insurer. With the increase in the penetration of insurance plans, the IRDAI (The Insurance Regulatory and Development Authority) has made rules for a free look period in the life insurance industry. This option is offered to ensure the protection of customers while buying life insurance plans.

How Does Free Look Period in Term Insurance Work?

Let’s understand this with the help of an example:

Mr Raman bought a 1 Crore term insurance policy online. He even paid the first premium. However, when he received all the documents for his term insurance plan, he realized that the policy did not suit his needs and decided to terminate his policy. He submitted the request to cancel his policy before the end of his 30 day free look period and thus received the premium amount back minus the net of applicable processing charges.

What is the Purpose of a Free Look Period?

The free look period is a policy implemented by India's Insurance Regulatory and Development Authority to ensure customer protection and satisfaction. The free look period serves the following purposes :

• A free look period is meant to give the customer enough time to go through all the documents regarding their policy in detail. Before purchasing a long-term policy, one can understand all the terms and conditions in the free look period.

• During the free-look period, the customer might realize something in their life insurance policy that does not suit their needs. This might change their mind regarding the policy, and they would wish to surrender it.

• Sometimes, the customer may end up buying a policy that might not align with their interests. The free look period allows the customers to realize this and cancel their policy and receive the premiums paid, excluding net of applicable processing charge.

What are the Key Points to Remember About the Free Look Period?

Here is a list of the key points to keep in mind about the free look period when buying a term insurance policy:

• Applicability: There is a free look period for all term life insurance policies, irrespective of the type. You must ask the insurer about the duration of the free look period before purchasing the policy.

• Time Limit: The free look period is usually 15 days after you receive your physical documents. One must ensure to go through all the documents within this period and request cancellation if required.

• Cancellation Request: You need to raise a cancellation request within the free look period. You can either call, email, or use the website application form to cancel your policy.

• Details: For terminating the policy your insurer will ask you for details related to the policy such as reason for termination, cancelled cheque, receipt of the first premium, etc.

• Refund: The insurance company is bound to refund the customer the premium paid by them. However, sometimes, premiums might be deducted to exclude net of applicable processing charges.

What happens if you Surrender the Policy after the Free Look Period?

You can still terminate your policy after the free look period ends through surrendering. Usually, the premium is written off as surrender charges if you cancel the policy in the first year. But, if they prepaid the premiums, the insurer will deduct the premium of coverage duration and refund the remaining amount. In case the policy is surrendered after the accumulation of surrender value, the insurer will pay the surrender value and terminate the policy at your request.

How can I cancel a Term Insurance Plan Within the Free Look Period?

Step 1: Check if you are eligible for the free look period. It is usually for 15–30 days after all policy documents have been received.

Step 2: You can request policy cancellation online or offline with reasons for cancellation.

Step 3: After the cancellation request, submit the documents asked to start the process.

Step 4: After verification of your application, the insurance company will cancel your policy and refund the amount after certain deductions.

Wrapping it Up!

The free look period in term insurance serves as a vital safeguard for policyholders in India, allowing them to review their policy terms and conditions thoroughly after purchase. This period, typically 15–30 days depending on the insurer, allows customers like Mr Raman to reconsider their decision without incurring any financial penalties.

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