Must Know: All about free-look period
A feature with all insurance policies which is also a way to check mis selling
When it comes to insurance, guaranteed returns is a feature or promise that drives score of people to taking a policy. But there is also a guaranteed return which is more important – the guarantee that you could return the policy to the insurer if you do not feel it is for you or is something that you had not expected it to be. Under the free-look period, as a policyholder, you have the option to return the policy back to the insurer. The insurance regulator IRDAI has built into its regulations a consumer-friendly provision of free-look period.
What is Free-look period?
The free-look period in a life insurance policy is an option available to the new policyholder in which they can cancel the policy. The option to cancel the policy or return it can be exercised within 15 days from the receipt of the policy. This option allows policyholders to go through the policy fine print and details and understand every aspect of the policy and its functioning. The details can help policyholders understand how the plan will work, the charges applicable and their financial commitment through the tenure of the policy.
Ways to exercise the option?
In case the policyholder is keen to cancel the policy, first thing that they need is to call the customer service of the insurer and understand the process. Usually the policyholder will need to send the original policy documents and an application form for the cancellation of policy to customer service department or local branch (depends on the insurance company). It is important that documents are sent within 15 days of receipt of policy from the life insurer.
How much premium is refunded?
Premium will be refunded by the company with the following deductions: a) cost pertaining to medical tests if any, b) stamp duty and c) risk premium in case customer is covered in the free-look period. In Unit Linked Plans, any change in the net asset value (NAV), either on the upside or on the downside, is passed on to the customer and accordingly additions or deductions are made.