What is the Free Look Period in Term Insurance?

Buying term insurance is one of the most important financial decisions you’ll make. But what if, after purchasing it, you realize the plan doesn’t match what was promised? Maybe the coverage amount, premium, or terms seem different? That’s exactly where the free look period comes in.

The free look period provides a 30-day window for you to review, modify, or cancel your term plan if you’re not satisfied. In this guide, we’ll explain how the free look period works, how refunds are calculated, what charges are deducted, and how to cancel or modify your policy step-by-step.

We’ll also cover key benefits, limitations, and expert tips to help you make the most of this feature, and share why, at Ditto, we believe the best use of the free look period is avoiding the need for it altogether.

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How Does a Free Look Period in Term Insurance Work?

When you buy a term insurance policy, you receive a set of documents outlining its features, exclusions, and terms. The free look period allows you to review them and ensure everything matches what was promised.

Here’s how it works:

1.) Day 0 refers to the date you receive your policy document, whether it’s delivered physically, sent by email, or downloaded digitally. Keep delivery proof (courier log, e-mail timestamp, policy-download receipt).

2.) Review all clauses related to coverage, riders, exclusions, and payment terms.

3.) If something seems off, you can request either:

1. Modification: to adjust details like policy term, sum assured, or premium payment term.
2. Cancellation: to withdraw entirely from the policy.

4.) Submit your request in writing (email, form, or letter) along with KYC documents.

5.) The insurer processes your refund after deducting a few standard charges, which may include:

a. Pro-rata premium: This is the portion of your premium that corresponds to the number of days your policy was active.

Suppose your annual premium is ₹12,000 and you cancel the policy after 15 days. In that case, the insurer calculates the cost for those 15 days, roughly ₹33 per day, and retains about ₹500 as the pro-rata premium.

b. Stamp duty: This is a government fee charged for issuing your insurance document, whether physical or digital. It’s a fixed, non-refundable cost, usually about ₹0.20 per ₹1,000 of the sum assured.

So, if your term plan has a sum assured of ₹1.5 crore, the stamp duty could come to around ₹3,000. Even if you cancel the policy within the free look period, this amount is kept to cover documentation costs.

c. Medical examination charges (if applicable): Most term plans with large cover amounts require a medical test. The insurer arranges and pays for this test initially, but if you cancel the policy during the free look period, the cost is deducted from your refund. For instance, if your medical check-up costs ₹800, this amount will be adjusted.

6.) The insurer must refund within 7 days of your request. If delayed, they owe you interest at the bank rate plus 2% automatically.

Note: The free look period applies only to the initial issuance of a policy, not to renewals or reinstated policies. Also if you cancel the application for term insurance before the policy is issued and before medical tests are done, the insurer usually refunds the entire premium.

What Is The Purpose Of A Free Look Period in an Insurance Policy?

The free look period is designed as a consumer protection safeguard. Its core purpose is to ensure you are never forced to stay in a plan you don’t fully understand or agree with.

Here’s why it exists:

1. Prevents mis-selling: You can exit if the actual terms differ from what the agent or brochure promised.
2. Promotes transparency: It gives you time to verify the clauses, exclusions, and benefits.
3. Encourages informed decisions: You can clarify doubts before committing to a long-term financial obligation.
4. Builds trust: Insurers that offer a fair review period help customers feel secure and respected.

Free Look Period  in Term Insurance: Benefits and Limitations

Benefits of the Free Look Period  in Term Insurance

1. A 30-day grace window to review the policy after purchase.
2. Flexibility to modify or cancel your policy without significant loss.
3. Refund of premiums (minus small deductions).
4. Empowers customers to make confident and informed decisions.

Limitations of the Free Look Period  in Term Insurance

1. The refund excludes certain charges, such as stamp duty, underwriting, medical, and pro-rata premiums.
2. If you pay your premiums monthly or quarterly, the deductions might sometimes equal the amount you’ve already paid. In such cases, you may not receive any refund.
3. Requires written communication, back-and-forth with the insurer, and documentation, which can take time.

Free Look Period in Term Insurance: Use Case

Let’s say Riya buys a ₹1 crore term insurance plan and receives the policy on 1st May. After reading the document, she notices that her policy term is 20 years instead of the 30 years she requested.

She contacts the insurer on 20th May, within her free-look period, and requests a correction to the policy term. The insurer updates the term and issues revised documents. Since the policy term has increased, she will have to pay an extra premium for the extended duration of coverage.

Now, imagine Riya wanted to cancel the plan altogether instead. She could do so within the same 30-day period, and the insurer would refund her premium after deducting:

Note - Calculation for illustrative purposes only

How to Cancel or Modify a Policy Within the Free Look Period

If you wish to cancel or modify your term plan, here’s how to do it:

1. Write to your insurer: Email, online form, or physical letter addressed to the customer service department.
2. Mention key details: Policy number, issue date, and your intent (modification or cancellation).
3. Attach documents: KYC proof, bank details for refund, and the original policy (if physical).
4. Submit within 30 days from the date of receiving your policy documents.
5. Wait for confirmation: The insurer will process the refund or issue revised documents within 7working days.
6. Keep records: Always save acknowledgment emails or reference numbers for future reference. Moreover, keep your agent involved so they can actively follow up.

Ditto’s Tip: Always verify your policy receipt date. The 30-day free look period begins from that exact date, not from the day of purchase or payment.

Why Talk to Ditto for Your Term Insurance?

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Conclusion

The free look period in term insurance gives you a second chance to validate your choice, to review, modify, or cancel your policy if needed. It’s a safeguard that ensures transparency and protects you from mis-selling or miscommunication. That said, use the free look period only as a fallback and aim to get the policy right the first time.

At Ditto, we primarily assist with high-value term plans, often ₹1 crore and above, where non-refundable costs, such as stamp duty and medical tests, can add up to ₹2,000–₹5,000. This means that cancelling a policy will definitely be an expensive affair. Moreover, cancelling within the free look period also means extra paperwork, follow-ups, and delays.

That’s why we recommend reviewing your policy thoroughly before purchase. Go through the brochure, benefit illustration, and terms carefully. With Ditto’s expert guidance, you can get the right policy from the start,  without relying on the free look period later.

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