Last month, one of our IRDAI-certified advisors took a call, which went like this -
Client: “Hi! So, I bought a term insurance plan from **** because I was getting a lot of suggestions from this insurer across my social media platforms, and the policy seemed decent enough. However, after buying it, I discussed the plan with one of my colleagues, who said that I got duped into buying a plan that would incur higher premiums than what should be the case. Now, I am confused and worried. Can I change my policy and my insurer? Can you help?”
Advisor: “Sure, Sir. I will try my best to help. But first, can you tell me when you bought this policy?”
Now, from here on, the conversation could have gone either of two ways based on his reply -
CASE 1: The client replied, “It’s been only 2 months.”
CASE 2: The client replied,” It’s been 20 days.”
In the first case, we would have been completely helpless, while in the second case, we would have been able to help the client cancel the current plan and find the best term insurance plan that would suit his financial requirements and goals.
The reason? “FREE LOOK PERIOD in term insurance plans”
So, what exactly is the free look period? What are its key aspects, benefits, essential things to remember, and ways to maximise its benefits? Let's find out!
What is the Free Look Period in Term Insurance Plans?
The Free Look Period offers a valuable benefit for policyholders, as mandated by insurance regulators in many countries, including India. This period typically lasts 15 to 30 days from receiving your insurance policy. During this time, you can review the policy’s terms and conditions to ensure it meets your expectations. If you’re unsatisfied with any part of the policy, you can return it and request a refund of your premiums. Remember, the insurer may deduct costs such as medical exam fees or stamp duty before issuing the refund.
Heads Up: It takes an average person up to 5 hours to read & analyze a policy, and 10 hours or more to compare different plans and make a decision.
This is why we propose a better alternative - taking a 30-minute FREE consultation with Ditto’s certified advisors. We have a spam-free guarantee, and we’ll never push you to buy a plan. Don’t delay this - we have limited slots every day, so book a quick call here before they run out.
As per the IRDAI, the free look period for all new life insurance policies (except those with a tenure of less than one year) will now have a free look period of 30 days (effective from 1st April 2024.
What are the Key Aspects of the Free Look Period in Term Insurance?
- Timeframe: You get at least 15 days (or 30 days for electronic or distance-sourced policies) from receiving your policy to review the terms and conditions. If you’re unsatisfied, you can return the policy within this period.
- No Questions Asked: You don’t need to provide any reason for cancelling during this period. The decision is entirely yours, and the insurance company must honour your request without question.
- Full Refund: If you choose to cancel during the Free Look Period, the insurance company must refund your premium minus any applicable deductions, such as medical exam fees or administrative charges. This ensures you aren’t financially tied to a policy that you are unhappy with.
- Purpose: The Free Look Period exists to protect policyholders, giving you the chance to carefully evaluate the policy and make an informed decision without any pressure. It ensures you fully understand the coverage and benefits before committing.
What are the Benefits of the Free Look Period in Term Plans?
- Transparency and Trust-Building: Offering a free look period shows that insurers prioritise transparency and customer satisfaction. It builds trust by allowing you to reassess your decision and make changes if needed.
- Safety Net for Unsuitable Policies: If the policy doesn’t meet your expectations due to miscommunication or misunderstanding, the free look period allows you to cancel it without facing financial consequences.
- Time for Informed Decision-Making: The free look period allows you to thoroughly review your policy, understand the terms, and decide if it suits your needs. You can take this time to seek expert advice or compare other policies before committing.
- Refund of Premiums: If you cancel the policy during the free look period, the insurance company will refund your premiums, with deductions for any applicable fees or charges.
| Use cases | Description | Examples |
|---|---|---|
| Case 1: Full Refund of Premium | If you choose to return the policy during the free look period and haven’t made any claims, you’re entitled to a full refund of the premium paid. Remember that the free look period is limited, usually lasting 15 to 30 days, depending on the insurer and the type of policy. | John buys a life insurance policy with a 30-day free look period. After reviewing the details, he realises it’s not fitting for him. Since he hasn’t made any claims, he contacts the insurer to cancel the policy. As a result, John qualifies for a full refund of the premium he paid. |
| Case 2: Proportionate Deduction | If the policyholder has used part of the insurance coverage during the free look period, they’re entitled to a partial refund. The refund is based on the unused portion of the coverage, meaning it’s adjusted to reflect what hasn’t been used. | John bought a term life policy with ₹500,000 coverage for 10 years, paying ₹1,000 annually. After a month, he decides to cancel during the free look period. Since he used 1/12th of the coverage, he’s entitled to a refund for the unused 11/12th. The insurer will refund ₹916.67 (₹1,000 x 11/12) for the unused portion of the coverage. |
What are the Important Considerations for the Free Look Period in Term Insurance Plans?
- Notification Process: To use the free look option, notify the insurance company within the specified period, usually by submitting a written request along with your policy documents.
- Policy Surrender vs. Free Look Period: The free look period differs from surrendering a policy. Cancelling after the free look period may involve penalties or a loss of premiums, depending on the policy terms.
- Premium Refunds and Deductions: While premiums are generally refundable, insurers may deduct certain fees, such as medical exam costs, stamp duty, or administrative charges, from the refund.
How Can You Make the Most of the Free Look Period in Term Insurance Plans?
To maximise the benefits of the Free Look Period, consider the following steps:
- Compare Policies: If you’re unsure about your policy, use the Free Look Period to compare it with options from other insurers. This helps you find the best fit for your needs.
- Read Carefully: Take the time to thoroughly review your policy document. Pay close attention to the terms, coverage, premium details, and any exclusions or limitations.
- Document Everything: Keep track of all your communications with the insurance company during the Free Look Period. Save emails, letters, or any other messages, as they can be useful if any issues come up later.
- Seek Clarification: If anything in the policy isn’t clear, contact the insurance company or your agent for explanations. It’s crucial to fully understand the policy before you make any decisions.
Why Talk to Ditto for Your Term Insurance?
At Ditto, we’ve assisted over 3,00,000 customers with choosing the right insurance policy. Why customers like Achint below love us:
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Conclusion
The free look period in term insurance is a key safeguard for policyholders, giving you a chance to rethink your decision after buying a policy. It provides peace of mind by allowing you plenty of time to review the policy, get advice, and make an informed choice. Knowing the details of the free look period is important, as it helps you use this option effectively. Before finalising your term insurance policy, check with your insurance provider about the free look period and its specific terms since these can vary between companies!
