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What is the Free-Look Period of a Life Insurance Plan?

  1/18/24 9:30 AM

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  1/18/24 9:30 AM   |

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The free-look period is basically a trial period for your life insurance policy. Cancel your policy within this timeframe to get back the premium amount you have paid until that point. If you purchase a life insurance plan that fails to meet your expectations, then it is best to terminate the policy immediately within the free-look period itself. Each insurer has their own rules regarding the free-look period for their insurance policies. Below are a few key details that will help you understand the importance of insurance free-look periods.

Do All Insurance Policies Come with a Free-Look Period?

Yes, all life insurance policies sold in India need to have a free-look period. This is a mandate by the Insurance Regulatory and Development Authority of India (IRDAI) that all insurance companies follow. However, the duration of the free-look period can change from insurer to insurer. Make sure that you find out a policy’s free-look period before finalising your purchase.

How Long is the Free-Look Period for an Insurance Policy?

The free-look period for a life insurance policy can range from 10 to 30 days, depending on the insurance company’s terms and conditions. Edelweiss Life Insurance offers a free look period of 15 days from the date of the receipt of the policy document. If the policy has been purchased online or via distance mode, then the free look period is extended to 30 days. 

How to Initiate the Cancellation Process?

If you want to cancel your policy within the free-look period, you will have to send a written request to your insurer/agent. Some insurance companies also provide an online cancellation form on their website. You can cancel your Edelweiss Life Insurance policy within the free-look period by logging into your policyholder account and requesting a refund. 

The insurance company will also ask you to provide various documents such as the original policy document, identity proof, receipt of the first premium etc. They might also ask you for your reason of cancellation. 

Will You Receive Your Entire Premium Amount Back?

Generally, you will not receive the entire premium amount paid for the policy. Certain cancellation charges might be imposed, and other deductions may be made based on the cost of medical tests borne by the insurance company. The cancellation charge is generally proportional to the coverage duration provided during the free-look period, so the charges will be lower if you cancel your policy sooner. 

Do General Insurance Plans Also Come with Free-Look Period?

While all life insurance plans need to have a free-look period, the same is not true for other forms of insurance. For example, only health insurance plans that have a term coverage of over 3 years will offer a free-look period. Always check whether a plan has a free-look period or not. Usually, short-term general insurance plans may not have any free-look period, so make sure that you are confident about the policy before buying it. 

Is it Possible to Cancel a Life Insurance Policy After the Free-Look Period?

Yes, it is possible to cancel a life insurance plan at any time. No one can force you to continue paying for your life insurance plan. However, cancelling a policy after the free-look period means that you have no guarantee of getting back any of your money. In fact, you can lose all your premiums paid if your policy lapses after the free-look period. 

However, if your policy has acquired a surrender value, then you will recover part of your paid premiums upon the termination of your policy. Most life insurance plans only accrue a surrender value after three policy years. This value will be returned to you once the policy lapses or has been cancelled. Keep in mind that the surrender value does not fully cover the value of your premiums. 

Conclusion

You do not have to immediately commit to an insurance plan even if you pay your first premium! By cancelling your policy within the free-look period, you can recover most of your money without suffering a loss. This allows you to quickly switch to a policy that is more suitable for your long-term financial goals. 

 

Aastha Mestry - Portfolio Manager 

An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.

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