What Is The Free Look Period In Life Insurance Policies?
Ever heard of “buyer’s remorse”? This may happen with life insurance policies. To overcome this feeling, there is the free look period which provides the policyholder time to review and assess the policy by reading the nuances of the policy. Many individuals remain unaware of the benefits offered by the free look period. Here we review the nuances of the free look period.
What is a free look period?
A free look period in life insurance is a period when the policyholder is allowed to review and assess the terms of the policy in a detailed manner after the delivery of the policy document. The policyholder is allowed to terminate the life insurance policy if he is unsatisfied with the inclusions or exclusion and other terms of the policy. Suppose there has been any misrepresentation during the purchase of the policy, and you chance upon information which does not align with your requirement. In that case, you may choose to cancel the insurance policy within the freelook tenure.
The free look period in life insurance is usually 15 to 30 days from the date of delivery of policy document, depending on the channel through which you have purchased the policy. Usually 15 days1 of freelook period is provided for an offline channel and 30 days for policies purchased online or through distance marketing channels2.
It is a customer-friendly provision introduced by the IRDAI or the Insurance Regulatory and Development Authority of India. This period allows for cancellation of policy. The period allowed as a free look period has been ascertained by the regulator.
Within this time, the policyholder will be required to decide if he wishes to continue with the policy or cancel the same.
Example of free look period in life insurance:
Mr Mehra buys a life insurance policy. After receiving the policy document, he realises that some exclusions are not aligned with his requirement. Upon further investigation, he realises that there are other products which offer better and wider coverage for more competent premiums. In such a scenario, if the free look period has not elapsed, Mr Mehra can invoke the policy cancellation. The premium paid, less of charges, will be returned to him.
Some of the costs that could be deducted are the cost of medicals, if any, stamp duty and the mortality for the days of coverage provided to him before the same is cancelled under the option of “free look”.
Why should you pay attention to the free look period in insurance?
Buying life insurance may seem like a complex phenomenon, especially so for someone who does not have much idea about the working of life insurance plans. The policy document is issued to the policyholder upon issuance of policy. The document pertaining to the policy requires thorough inspection and understanding.
Thus, the free look period is the time given to assess and understand the various clauses of the policy before you make a commitment to continue with the policy.
The free look period is the time you take to inspect your policy on close counters. You should use the free look period to thoroughly inspect and evaluate the policy before you commit to continue with the policy. This is when “reading the fine prints” is essential.
This free look period gives you the time needed to thoroughly understand the finer nuances of the policy. The final onus is upon you to understand the nuances of a life insurance policy and make the final decision.
How to invoke the free look period?
An insurance policy is a legally binding contract which provides certain rights as well as responsibilities to the insurer and the life insured. The policy defines the benefits that are accredited to the insured against the premiums paid by the policyholder. If the terms and conditions that were briefed during the purchase of the policy do not match with what you see in the policy document or you chance upon any other insurance policy offering better terms, you can choose to cancel the plan during the free look period in writing within the stipulated timeframe.
Life Insurance companies specify the freelook cancellation norms at policy inception.
If you intend to cancel or terminate your insurance plan within the free look tenure, you would be required to inform the insurer on time, and they will take it forward. You will have to provide the original policy contract received, premium receipt and a cancelled cheque to process the policy cancellation.
Now that you understand the free look period in insurance, remember to inspect and examine the policy document during the tenure of free look. Utilize these benefits extended by the regulator to your advantage!
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