What is Free Look Period in Insurance?
‘Insurance is a subject matter of solicitation.’ We see this line in almost every advertisement and literature soliciting and/or canvassing Insurance. This means Insurance has to be solicited by us and after examining our risks the insurance company will provide us the risk coverage. While this is theoretical, on the ground we see a lot of push from various channels trying to sell insurance. Be it for friends and family obligation or due to lack of proper understanding the complexity of the insurance product we end up buying wrong insurance policies. If you have bought a new insurance policy and receive the policy document finding that the terms and conditions are not what you wanted. What do you do? Grin and bear it? Not at all. IRDAI has built into its regulations a consumer-friendly provision that takes care this problem.If you have bought a policy and realize you don’t want it you can return it and get a refund. This facility is termed as Free look period in Insurance.
What is the applicability of Free-look period provisions ?
Though the Insurance regulator has introduced this consumer friendly provision,there are certain conditions to its applicability. Not all insurance policies have this free look period option. This applies only to Life insurance policies and to certain categories of Health insurance only. In Health Insurance this is applicable only for policies that are for a term of at least 3 years. The other insurance policies currently do not have the provision of this Free Look period.
What is the Process of availing Free-look Period option?
The process to avail the option of free look period is prescribed by the regulatory guidelines to make this a transparent and standard process. One can exercise this option within 15 days of receiving the policy document. If insurance policy is bought online then the free look period is for 30 days of receiving the policy document. The communication cannot be oral and has to be in written to the insurance company. Many of us inform the insurance intermediary but this may not be enough. One has to communicate to the company in writing.
What are the Refunds and deductibles?
If your policy is in the applicable category and you have communicated your intent to use the provision of free look period in the prescribed process, then you are eligible for the refund of premium paid. Here comes the question, Is all the premium paid is refundable ? or there any deductibles ? As per the regulatory guidelines the premium refund will be adjusted for proportionate risk premium for the period on cover. The insurer also reserves the right to deduct the expenses incurred, if any by the insurer on medical examination. In case of ULIP’s the refund will be based on the NAV (Unit Value). The insurer also may deduct stamp duty charges and pay the net amount post these deductions to the registered bank account of the Insured.
Key Takeaways
It is always advised to take a proper professional advice like that of a financial planner or an insurance expert before purchasing Insurance Policy. Always deal with registered insurance intermediaries only. A proper due diligence of the policy and its features is to be done before buying Insurance. In case of failure of any or all of these, we still can use the option of free look period as per the prescribed process with in the stipulated time. It is for the client to produce the proof of receipt of the document so it is advised to keep a record of the same.
General FAQ
What is Insurance?
Insurance is a financial tool specially created to reduce the financial impact of unforeseen events and create financial security.
Why buy Insurance?
Life is full of uncertainties. We face various risks in our day to day life including risks to our life, health, property and so on.We don’t know whether something unfortunate will happen to us or when, but it is certainly possible for us to take measures to reduce the financial impact of these risks and protect ourselves financially through Insurance.
How does Insurance work?
Insurance works on the law of large numbers where contributions by many in the form of premium pay for the losses of a few. By paying a premium for protecting against a certain type of loss, you will be protected for a certain sum of money that you will receive if you face that loss.
What insurance to buy?
Insurance is available for unpredictable events such as death, accidents, sickness, loss or damage to property. These are simple you should protect yourself against and what you should buy are life insurance, accident insurance, health insurance and insurance for whatever property we are looking to protect – motor vehicle, house and so on.
How to buy insurance and whom to buy it from?
You can buy your insurance policy through an individual agent, a corporate agent, a broker or any other registered Insurance Intermediary. List of all registered intermediaries is available on IRDAI website.
What is Free Look Period in Insurance?
If you have bought a policy and realize you don’t want it, you can return it and get a refund. This facility is termed as Free look period in Insurance.
