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Free-look period for Life Insurance policies - what you must know

As consumers, we often end up buying a product that we later regret buying because we bought the wrong product, or didn't get the specifications right, or realize that we were wrongly sold the product. Usually, it does not matter if the product is not too costly. But, what if the product is a life insurance policy and the premium you have paid is say about Rs 50,000? Fortunately, consumer protection rules exist. In the case of insurance, there is a "free-look" period during which you can return your policy, with no questions asked. Here we share with you some basic knowledge on this facility so you can make smarter decisions regarding your insurance purchase.

What is the "free-look" period?

Our insurance regulator, IRDA, allows every policyholder 15-days from the receipt of the policy to revisit his or her purchase decision. Up to the end of this period, you are free to re-think and reverse your insurance purchase decision, by returning your policy to the insurance company and asking for your premium to be returned to you.

The free-look period is a very consumer friendly facility that can help protect a policyholder. Once you receive your policy, then during the first 15 days you can go through the fine print of the policy to see if the coverage amount, policy specifications, obligations of the insurance company are what you expected them to be, based on what your insurance salesperson claimed in the proposal form. If you feel that you have been short-changed, lied to or been put under duress to buy a policy that you do not need, then you can exercise your right to return the policy.

As a result of the free-look period, the process of buying insurance has become more transparent. Consumers have been empowered to be able to act in their best interest, without any restrictions.

Do I have to incur any costs?

The entire amount of premium you paid will not be refunded to you. When the policy is issued to you, it involves costs associated with your medical tests and the administrative costs (like stamp duty) and service charges. The insurance company is entitled to recover these costs from you, but these are generally are minimal.

How can I exercise the "free-look" option?

Clearly, with only 15 days available to you, you need to act swiftly.

Once you have decided that the policy is not what you want, call the customer service department of the insurance company and understand the cancellation process from them. In some cases, you might be required to send the original policy document, as well as a filled out cancellation form to the customer service department. Alternatively, you can also go the local branch of the insurance company and fill in the cancellation form in person.

If you are mailing documents and forms, take into account any delays that might occur due to your mail or courier service. In any case, whether you cancel your policy telephonically, or do this in person, this activity of cancellation has to be done within 15 days from the receipt of the policy.

Does everyone offer "free-look" period?

All life insurance companies have to offer this facility. As of 2009, the regulator has also made it mandatory for health insurance plans that offer coverage for 3 or more years to offer a free-look period at the time of the inception of the first policy.

Comments

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ppp said : 04/03/2011	I want to know whether FLP starts from issuance of policy or receipt of policy by policy holder?
Morwin Johans said : 21/02/2011	recently FLC has been increased to 30 days by few companies, due to the latest changes incorporated by ULIPS...