How to Cancel Life Insurance Policy Within Free-Look Period?

The decision to cancel a life insurance policy can be based on a variety of reasons. Policyholders can cancel their free look period insurance policies by simply contacting their insurer or stopping their payments altogether.  The impact of cancelling your life insurance policy depends on the type of policy, the start date, and the terms and conditions associated with it. Notably, cancelling term life insurance is fairly easy, but whole life insurance carries cancellation fees. 

There is a 15-day free-look period after the receipt of a life insurance policy. During this period, policyholders who wish to cancel the policy can get a refund of the premiums that they have paid for their free look period insurance. 

What is the Free Look Period in Life Insurance?

During the initial stages of purchasing a life insurance policy, policyholders are often granted a free-look period. This period is a designated timeframe for assessing and reviewing the policy's terms and features. Typically, the free-look period ranges from 10 to 30 days, although the exact duration may vary based on the insurance provider and jurisdiction.

The free-look period insurance provides policyholders with an opportunity to thoroughly examine the policy they've acquired and make an informed decision about its suitability.

Purpose of a Free Look Period

The purpose of a free look period involves the following:

• Thorough Policy Review: This period offers policyholders enough time to carefully read and understand the details of a life insurance policy before making a long-term commitment.

• Cancellation Flexibility: If you discover terms or conditions you don't like, the free look period allows you to change your mind and cancel the policy without any extra charges.

• Protection from Unsuitable Policies: Free look period safeguards you from policies that agents might push, ensuring you can return the policy if it doesn't suit your needs.

• No Extra Charges: Returning the policy during the free look period won't cost you extra.

• Addressing Doubts Upfront: Instead of terminating the policy, this period allows you to ask questions and clarify doubts, promoting a clear understanding before making a decision.

• Informed Decision Making: Lastly, the free look period is in place to ensure you thoroughly understand the policy, helping you make informed decisions.

Reasons for Cancelling the Life Insurance Policy During the Free-Look Period

There are several reasons why policyholders might consider cancelling their life insurance policy within the free-look period. Firstly, this period allows policyholders to critically evaluate whether the policy aligns with their financial goals and needs. It also permits reconsideration in light of any recent life changes, such as marriage, the birth of a child, or shifts in financial circumstances that might prompt a reevaluation of their insurance requirements.

Steps To Cancel Policy During Free Look Period

In the event of any regrets after adopting a life insurance policy, it is possible to cancel it and avail refund of the premium. The free look period is generally 15 days and the process of cancellation is as follows:

Step 1: Send the Requisition to Cancel the Policy

If the policyholder feels that it is not a suitable option for them, they must fill out a cancellation request form. For the convenience of customers, many insurers allow users to submit the cancellation form online. The duly filled-out form should, however, be submitted in hardcopy at the nearest office of the insurance company. This form has to be filled with all the necessary information such as:

The details of the policy
The date on which the policy papers were received
The details of the insurance agent
The reasons for discontinuing the policy. 

Step 2: Response From the Company for Requisition

If the insurance agency receives a request for cancellation of the free look period insurance from the policyholder, they will contact the insurer and attempt to resolve the issues that led the policyholder to request cancellation. The company will proceed with the cancellation and refund process if the policyholder remains stable in his/her decision despite all the efforts.

Step 3: Refund of Premium

Upon successful policy cancellation, policyholders are entitled to a refund of the premiums paid during the free-look period. The refund amount is usually calculated by deducting any fees or charges specified in the policy agreement. It's important to keep in mind that the refund might take some time to process, and policyholders should be patient as the insurance company completes the necessary procedures. A complete refund is not possible as the following deductions will be made in the refund amount.

1. Proportionate risk premium
   2. Stamp duty costs
   3. Costs incurred by the insurer on the medical check-up- if any

Things to Keep in Mind while Cancelling Life Insurance Policy

In addition to the primary steps involved in cancelling a life insurance policy, there are a few important considerations to keep in mind. Policyholders should retain copies of all communication related to the cancellation process, including the written request and any responses received from the insurance company. If the policy includes any additional riders or add-ons, policyholders should make sure you cancel these as well, if desired.

Conclusion

You have to notify the insurer of your decision about the cancellation of your free look period insurance, either by contacting their customer service department or by visiting their office. A cancellation through your agent might not be a good idea. Ensure that you note down the date that you received the policy document and be very careful not to sign a backdated receipt, since the free look period begins on the date you received the policy document.  

FAQs

Ques 1. What is the free-look period in a life insurance policy?

The free-look period is a specified duration, usually 10 to 30 days, during which policyholders can review their newly purchased life insurance policy. During this period, policyholders can assess the policy's terms, coverage, and features. If they are not satisfied with the policy, they can choose to cancel it without incurring any financial penalties.

Ques 2. Why would I consider cancelling my life insurance policy within the free-look period?

There could be several reasons for considering cancellation within the free-look period. You might find that the policy doesn't align with your financial goals or needs upon closer examination. Additionally, significant life changes like marriage, the birth of a child, or changes in financial circumstances might prompt you to reevaluate your insurance needs and make changes accordingly.

Ques 3. What are the steps to cancel my life insurance policy during the free-look period?

To cancel your life insurance policy during the free-look period, start by thoroughly reviewing your policy documents to understand its terms. Contact your insurance provider's customer service or agent to express your intention to cancel. Then, submit a written request for cancellation, including your policy details, personal information, and reasons for cancellation. Following these steps ensures a clear and documented cancellation process.

Ques 4. Will I receive a refund if I cancel my policy within the free-look period?

Yes, if you cancel your life insurance policy during the free-look period, you are generally entitled to a refund of the premiums you've paid. The refund amount is typically calculated by subtracting any fees or charges mentioned in the policy agreement. Keep in mind that the refund process might take some time to complete, so it's important to be patient during this period.

Ques 5. What should I consider before cancelling my life insurance policy within the free-look period?

Before cancelling your policy, review the policy documents carefully to understand its terms, coverage, and any riders or add-ons. Assess whether the policy meets your financial goals and needs. It's also important to retain copies of all communication related to the cancellation process and to consider seeking advice from a financial advisor or insurance expert if you have any doubts or questions about the cancellation decision.

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