In simple terms, free-look period is the time given to you, after you have bought the policy — to request for its cancellation and refund of premium — if you find that the terms and conditions of the policy are not in line with your requirements or prior understanding.
Needless to mention, this free-look period comes with certain procedure and conditions.
Key aspects of the same are discussed below.
a) The facility of Free-look is only for Life Insurance Policies, and those Health Insurance Policies that have a term of at least 3 years.
b) You get 15-days from the date of receipt of the policy to ask for the cancellation. (In certain cases, insurance company even stipulate 30 days as free-look period.)
Since the date of receipt is a critical factor, you must retain the proof of receipt of the policy. Don't forget to check and confirm the date printed on the receipt.
c) This request must be sent to the insurance company in writing with all the necessary policy / bank details and revenue stamp of Re.1 affixed on the form. (Many companies have a free-look form available on their website.)
You must communicate with, and submit your documents directly to the insurance company. Going through the agent may delay the process and you could lose the benefit of this free-look period. Don't let your policy termination option become time-barred due to any laxity.
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d) You won't get the full premium back. Certain deductions would be made from the premium viz.
- proportionate risk premium for the period the cover is in force
- expenses incurred by the insurance company on medical examination, if any
- stamp duty charges
e) In case of ULIPs, the refund amount will depend on the NAV of the fund prevailing on the date of cancellation.
Suppose your premium was Rs.100 and Rs.75 was invested in the fund, after deducting Rs.25 as various charges.
On the date of cancellation of the policy, let's say the fund was valued at Rs.70. Thus, you will get back Rs.70 fund value Plus Rs.25 total charges paid Minus medical examination charges, stamp duty and proportionate mortality charges.
f) Documents to be submitted would include among others:
- the original policy document
- first premium receipt and
- a cancelled cheque
Free-look period is very critical and you MUST READ the policy documents and act within 15-days so as to ensure that what you have received is what you desired. It is the opportunity provided to you to save yourself from becoming a victim of mis-selling.
Beware...
...study the policy in detail BEFORE buying one instead of waiting for the free-look period
...every effort would be made to prevent you (or delay you) from cancelling the policy; so be very proactive and diligent in completing all the formalities.
