If you have ever bought an insurance policy and regretted it later, you might be aware of the free-look period. It is a provision that allows you to return the policy within a specified time frame and get a refund of the premium paid, subject to certain deductions.
The Insurance Regulatory and Development Authority of India (IRDAI) has recently proposed to extend the free-look period for insurance policies from 15 to 30 days, as part of its draft regulations on protection of policyholders’ interests and allied matters of insurers .
What is the free-look period?
The free-look period is a window of time given to the policyholder to review the terms and conditions of the policy and to return it if not satisfied. The free-look period is applicable at the inception of the policy and for policies with a term of at least three years. The insured will be allowed a period of at least 15 days (30 days in case of electronic policies and policies sourced through distance mode) from the date of receipt of the policy to exercise this option .
How does the free-look period work?
If the insured decides to cancel the policy during the free-look period, he or she will have to follow these steps:
- Communicate the decision in writing to the insurer within the free-look period. The communication can be done through email or letter with the policy details and reason for cancellation.
- Return the original policy document along with the cancellation request. The policy document can be sent by courier or handed over personally to the insurer’s office.
- Provide the bank account details for electronic transfer of refund. The insurer will process the refund within 15 days from the date of receipt of the cancellation request and policy document.
How much refund will I get?
The refund amount will depend on various factors such as the type of policy, the duration of coverage, and the expenses incurred by the insurer. The refund amount may not be equal to the premium amount as there may be some deductions as follows:
- Expenses incurred by the insurer on medical examination of the insured persons and the stamp duty charges.
- Proportionate risk premium for period on cover if the risk has already commenced and the option of return of the policy is exercised by the policyholder.
- Proportionate premium commensurate with the insurance coverage during such period if only a part of the insurance coverage has commenced.
- Repurchase price of the units as on the date of return of the policy in case of unit linked policy, in addition to the above deductions.
If you have any queries or complaints regarding your refund, you can contact your insurer or IRDAI’s grievance redressal cell.
Why is the free-look period important?
The free-look period is a valuable feature that can help you avoid buying a wrong or unsuitable policy. It can also protect you from mis-selling or fraud by agents or intermediaries. Some of the benefits of using the free-look period are:
- You can review the policy document carefully and check if it matches your needs and expectations.
- You can compare your policy with other similar products in the market and see if you are getting a fair deal.
- You can seek expert advice or clarification from your insurer or other sources if you have any doubts or questions about your policy.
- You can cancel your policy without any penalty or hassle if you are not satisfied with it.
How to use the free-look period effectively?
The free-look period is not meant to be used as a trial-and-error method, but as a last resort to correct a mistake or avoid a loss. Therefore, it is advisable not to buy a policy impulsively or without proper research and comparison. Here are some tips on how to use the free-look period effectively:
- Do not rely solely on verbal promises or assurances from agents or intermediaries. Always ask for written documents and brochures before buying a policy.
- Read the policy document carefully and understand all its terms and conditions, benefits, exclusions, charges, fees, etc.
- Check if your personal details, nominee details, sum assured, premium amount, payment mode, etc. are correct and as per your agreement.
- Compare your policy with other similar products in terms of features, benefits, costs, etc. You can use online tools or websites to do this.
- Seek expert advice or clarification from your insurer or other sources if you have any doubts or questions about your policy. You can also check the reviews and ratings of your insurer and policy online.
- If you are not satisfied with your policy, communicate your decision to cancel it in writing to the insurer within the free-look period. Do not delay or procrastinate as you may lose the opportunity to return the policy.
The IRDAI’s proposal to increase the free-look period is a welcome move that will give more time and flexibility to policyholders to make an informed decision about their insurance purchase. However, it is advisable not to buy a policy impulsively or without proper research and comparison. The free-look period should not be used as a trial-and-error method, but as a last resort to correct a mistake or avoid a loss.
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