What's a free-look period in your life insurance policy?
To initiate the process of cancelling the policy, you must download the free-look cancellation request form from the insurer's website.
You don’t easily get a second chance at most things in life. But apparently, you do get another chance to buy the perfect insurance policy if you mess up on the first go. Money matters are sensitive and nobody wants to invest their hard-earned savings into something dicey. While insurance is a great savior during the hour of crisis, financial or otherwise, you may end up overlooking some fine elements of the policy and buy it in a hurry. How to undo it? Well, have you heard of the term ‘free-look period’ vis-a-vis insurance products?
Free-look period
If you’re unhappy with a recently bought insurance policy, don’t worry. In view of the customer behaviour and to curb down insurance misselling, the Insurance Regulatory and Development Authority of India (IRDAI) offers you a certain time period to review a policy and cancel it if there is an issue at the customer end.
Starting from the policy receipt date, a time period of 15 days is given to all the policyholders as a ‘free look period’ for physical policies. One is free to return the policy within this period. For electronic policies, the free look period extends to 30 days. While we most know about the free look clause in life insurance policies, even health insurance policies now include this feature as a mandatory clause in the document.
Life insurance
If you return the policy within the free-look period, the premium paid minus the insurance company’s expenses on medical tests, stamp duty and proportionate risk premium will be refunded. However, you must not have filed for a claim during the same period to successfully get the policy cancelled and money refunded.
Meanwhile, in the case of unit-linked insurance plans (ULIPs), the policyholder may not get the actual refund as the refund will be subject to the Net Asset Value (NAV) fluctuations and other applicable charges too.
Health insurance
For health insurance plans, one can withdraw the policy without any penalties when opted for an annual premium payment option. Here the paid premium is refunded after adjusting the charges proportionate to the period when the policy was active.
Besides, if you chose to pay the policy premium via Equated Monthly Instalments (EMIs) i.e. monthly, quarterly, or half-yearly, then the insurer can reduce the free-look period. This varies depending on the kind of insurance plan and the company policy.