Dejargoned: Free look period in an Insurance Policy

We make many decisions in our lifes 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 a free look period in an insurance policy allows you to quit your policy after buying it without even losing anything. But many people are not aware of 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 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 the free look are clearly mentioned in the policy details. After canceling the policy during the free-look period, the buyer gets a refund of the initial premium that 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 and get the refund. This feature of an insurance policy removes the danger of mis-spelling by agents also as the buyer gets the time for analyzing and reviewing the policy during the period.

How to Cancel Your Policy During the 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
• The canceled cheque 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 a 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 that 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 the mortality charge. It is calculated on the basis of the number 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 the medical checkups of the insured.

Tips to Make Most of Free Look Period

Following are the tips to make the most of the 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 backdated 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.

Why it’s important for people?

The decision to buy health insurance is completely right, but due to lack of information, you end up buying the wrong policy and because of this you have to repent, you think that you get a chance to rectify your mistake and in terms of insurance, This tradition has been named the free look period.

The period provides you a kind of leverage to get to know about other policies and in due course of time, you can justify your decision by choosing the right policy and avail yourself better coverage of the policy. You can cancel your policy within the free look period itself, remember that the policy has to be canceled and returned to the insurance company within the free look period to get the refund.

Conclusion

A 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 the 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.