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

Getting a life insurance plan is a long-term commitment to secure your family’s future. Life insurance policies are an essential financial product, especially for families that have a single breadwinner. However, sometimes people get a life insurance plan without fully understanding their coverage needs or taking their long-term financial goals into account. An insufficient life cover can cause major financial issues for your loved ones in your absence.  

If you have just purchased a life insurance plan but have realized that it is not a right fit for you, then don’t stress out! There is still a way to cancel your policy and recoup all the premium you have already paid. All life insurance plans come with a free look period that allows you to prematurely end your plan without losing out on the money you have already spent. Let’s understand how the free look period works and why it is important for policyholders.  

What is a Free-Look Period in Life Insurance? 

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.  

Why is Free-Look Period Needed? 

Have you ever purchased something that you regret buying just a day later? All of us have felt buyer’s remorse at some point in our life. Maybe we got a new phone that wasn’t as good as advertised. Or perhaps we just bought a brand-new mattress that just doesn’t feel right. Most of the time, we feel buyer’s remorse after buying a mundane product that we just don’t need.  

But life insurance isn’t just any mundane item, it is an essential financial safeguard that protects your family in your absence. Moreover, life insurance is a long-term commitment that usually requires regular premium payments to remain active. If you purchase a life insurance plan that is clearly inadequate to support your family’s long-term goals, you are surely going to regret the purchase.  

This is exactly why a free-look period is needed. The free-look period basically acts as a trail/refund period where you can prematurely end your plan without losing your premiums. This means that you can comfortably terminate an inadequate plan without any major penalties while looking for a better alternative. 

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. 

When Does the Free-Look Period Start? 

A policy’s free look period starts as soon as you get your policy document and pay your first premium. 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 30 days from the date of the receipt of the policy document, irrespective of whether the policy was purchased online or through an agent.  

How to Cancel a Policy Within the Free-Look Period? 

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.  

Is the Full Premium Amount Refunded Upon Free-Look Cancellation? 

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.

Do You Need to State the Reason for Cancellation During the Free-Look Period? 

Yes, the insurance company will ask you why you’re cancelling the plan during the free-look period. However, they cannot deny your cancellation request. They only ask you for a reason to better understand what you didn’t like about the policy.  

How Long Does It Take to Get a Free-Look Refund? 

The average TAT (turn around time) for free-look refund is 7 working days post the initiation of the cancellation process. This time may vary based on your insurance providers terms and conditions, but most insurers usually conclude the refund process within a week or two.  

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.