Dejargoned: Free look period in an Insurance Policy

We make many decisions in our life and it’s not possible that all of our decisions go as per our plan. Even our well analyzed and informed decision turns out to be wrong and we have to bear  the consequences of the wrong decision. But that doesn’t happen in an insurance policy because the availability of free look period in an insurance policy allows you to quit your policy after buying it without even loosing anything. But many people are not aware about the benefit of free look period and they think that once they have bought the insurance policy, they will have to stick to it even if it turns out to be a wrong decision. So let us understand the various aspects of the free look period so that you can take advantage of your insurance policy.

What is a Free Look Period?

The free look period of an insurance policy gives the policyholder a window of 15 days from the receipt of the policy to decide whether he wants to continue the policy or quit it. The terms and conditions of free look period are clearly mentioned in the policy details. After cancelling the policy during the free look period, the buyer gets the refund of the initial premium which he has paid for the policy.

After buying the policy, if you feel like the policy is not what you signed for then you can easily cancel the policy within the free look period and get the refund. This feature of an insurance policy removes the danger of mis-selling by agents also as the buyer gets the time for analyzing and reviewing the policy during the free look period.

How to Cancel Your Policy During the Free Look Period?

You can make a request to the insurer for the cancellation of your policy by filling up the prescribed form.  You can download this form from the insurer’s website or get it from the agent or company’s office. Some insurer allows you to submit your request online also.  You also need to submit the following documents for cancellation of your policy during the free look period

  • Original policy document
  • ID proof of policyholder
  • First premium receipt
  • Cancelled cheque which will show the policyholder’s name and account number

Once the insurer receives the request for cancellation along with the required documents, it will validate the claim and will refund the amount to the buyer.

What are the Charges for Free Look Cancelation?

You don’t get the full refund when you cancel your policy during the free look period. Various charges like stamp duty charge, mortality charge, medical charge are deducted from the refund amount.

The stamp duty charge is the charge which the insurer has to give to the exchequer and since it is not refunded by the government upon cancellation of the policy, the insurer deducts this charge from you. It is mostly 0.2% of the sum assured.

The insurer takes the risk of your death from the date of issuance of the policy till its end and this risk comes at a cost which is known as mortality charge. It is calculated on the basis of numbers of days the insurer has given cover for your life and is deducted from the refund amount.

Before buying an insurance policy, you have to go through a medical checkup, the cost of which is paid by the insurer. Upon cancellation of the policy, the insurer deducts the amount spent on medical checkup of the insured.

Tips to Make Most of Free Look Period

Following are the tips to make the most of free look period:

  • Always give the correct contact information in the form because after buying a policy, a mandatory welcome call is given to the policyholder to explain the details of the policy so that you can decide whether you want to continue the policy or not. Sometimes the agent gives their own number and instead of you, the agent answers the call.
  • Always remember the date of delivery of your policy because your 15 days free look period starts from the date you receive the policy. Also check the date of receipt before signing it and avoid signing on back dated receipt.
  • Always cancel your policy during the free look period through your insurer and never go by oral intimation to the agent as the agent might try to delay the process so that the free look period will expire.

Points to Remember

  • It is always advisable to apply online for the cancellation of your policy during the free look period because it allows you to save time.
  • Never expect a full refund of the payment you have made towards buying the insurance policy as some charges are deducted from the refund amount.
  • Go through your policy details during the free look period so that you can understand your policy better and decide whether it is right for you or not.

A free look period gives you the flexibility of accepting or declining the insurance policy within 15 days from the issuance of the policy. You don’t need to stick to the wrong policy or quit it by losing everything as free look period gives you the time to go through the policy details and understand it well. So take advantage of your free look period and make a wise decision.

Harjot Singh Narula

Harjot Narula is founder and CEO of ComparePolicy.com, an IRDAI approved insurance web aggregator focussed on selling online insurance for companies. Harjot has more than a decade of experience in software development and has also spent 5 years in US working for the mortgage and risk management industry.

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