How to make the most of free-look period in insurance2 min read . Updated: 28 Jan 2021, 11:59 AM IST
- Depending on the insurance company and the state you reside in, the free look period can be between 15 and 30 days.
When an individual buys an insurance product, he or she is offered a free-look period at the inception of the policy. This period gives policyholders an option to do research even after they have taken a policy, and cross-check if the conditions mentioned in the policy documents are the same or not from what they had assumed.
According to the Insurance Regulatory and Development Authority of India (Irdai), the free-look period has to be provided for all life insurance policies, while in the case of health insurance, the policy term must be for at least three years. Depending on the insurance company and the state you reside in, the free look period can be between 15 and 30 days. Generally, the free-look period is of 30 days in the case of online policies.
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“It is a good way for policyholders to completely check what the policy will cover and what it will not cover within this time, and if they feel they have a better policy from some other insurer, they can cancel the policy with minimal penalties," said Adarsh Agarwal, appointed actuary, Digit General Insurance Ltd.
After getting the policy document, the policyholder must specifically look for the coverage and exclusions in the policy mentioned in the documents to get a clear picture.
Once the policyholder is convinced that the policy terms do not match his or her expectations, the person has to communicate their intention to cancel the policy in writing.
“Some insurance companies prescribe a standard form for cancellation of policy during the free look period. Policy details, date of receipt of the policy document, the reason for cancellation, and agent details must be mentioned in the application," said Naval Goel, chief executive officer and founder, PolicyX.com, an online insurance marketplace.
Remember that the cancellation and return of the policy to the insurance company have to be done within the free look period to get a refund.
“If a person wants to make the most of the free-look period he or she should always fill in the right contact details in the form, make sure to save the delivery date and cancel the policy through the insurance company," said Goel.
On receiving the cancellation request, the insurance company will get in touch with the policyholder to know the reasons for the cancellation and try to provide solutions. However, if one still wishes to cancel the policy, the insurance company will have to process the request and issue a refund.
The percentage of the money the policyholder will get back varies from insurer to insurer.
As per Irdai’s regulations, if the insured has not made any claim during the free look period, he or she is entitled to a refund of the premium minus any expenses incurred by the insurer on medical examination and the stamp duty charges.
It is important to go through the policy document after buying the plan to avoid issues at the time of claim settlement.
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