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Things To Know On Cancelling Insurance Policy during free-look period

IamCheated.com Research Team | March 19, 2019  6:43:pm

Things To Know On Cancelling Insurance Policy during free-look period

In the World of business, customer is king and no business can make profits without satisfying his customers.  If a customer is not happy with the product or service received, he/she has all the right to raise his/her complaint. Usually, as a customer, we prefer to test a product before making a purchase. The same rule is applicable even for insurance policies.

After the policy document is handed over to the policyholder, he will be given 15 days of time to review the policy. If the policyholder is not happy with the policy terms and conditions, he can return it within the 15 days. This 15 day period is called the free-look period.

See Also: How to study fine print before buying an Insurance?

Free-Look Period in Insurance

The IRDAI has set up the free-look period for insurance policies, to protect the interest of policyholders. After receiving the documents, if the policyholder finds out that he has been mis-sold or tricked  by his insurance agent or if the policy does not meet expectations, he can return the policy and get the refund. Usually, the free-look period will be for 15 days and this 15 day period commences from the day of receipt of the policy documents. If the insurance policy is availed online, the free-look period will be extended to 30 days.

Types of policies for which the free-look period is available:

Option to return the policy during the free-look period is available only for life insurance plans. In the case of health insurance, the policy term must be at least three years.

How to cancel the policy?

Once the policyholder finds out that the policy does not match expectations, he should request the insurer to cancel the policy. Some insurance companies do have a standard form for cancellation of policies during the free- look period. The policyholder must mention the reasons for cancellation, date of receipt of the policy document, agent details and policy details in the application.

See Also: Importance of full disclosure to your Health Insurance Company

What happens after policyholder request for the cancellation of the policy?

After the policyholder requests cancellation of the policy, the insurance company gets in touch with the policyholder and asks the reasons for cancellation. They even try to find solutions to the problems. If the policyholder still wants to cancel the policy, the insurer will process the request and issue a refund.

How much is refunded?

After the application is processed by the insurance company, the premium amount will be refunded. The amount will be refunded after deducting the following:

  • Medical examination fees which are borne by the insurance company.
  • Stamp duty charges.
  • The pro-rated risk premium for the period on cover.

Refund in case of ULIPs

If the policyholder is cancelling the ULIP within the free-look period, the refund is quite different when compared to other policies.  This is mainly because ULIP is a market linked plan. The amount refunded will be as per the current NAV of the ULIP applicable on the date of policy cancellation (after deducting the above mentioned charges).

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