Traditionally when buying insurance, people took advice from friends, relatives, agents, etc. Today, with the barrage of information available and people providing reviews and criticisms online, the circle of people you can turn to for advice has widened; however, you may still get unduly influenced by others’ opinions. You may get confused and overwhelmed and end up buying the wrong policy.
While getting other people’s advice and recommendations is not wrong, remember that everyone’s insurance needs are unique. What worked for your brother or your best friend or Ms ABC from Mumbai may not necessarily work for you.
You can turn to agents who help provide expert advice and detailed information. However, some unscrupulous agents may try to push a certain product because of the commissions involved.
In such cases, you get saddled with an incorrect life insurance plan that has no benefits for you. Does this mean your money is wasted? No!
To help people with exactly such predicaments, the insurance companies offer something called the FREE LOOK PERIOD.
What is a Free Look Period in Insurance?
Formulated by the Insurance Regulatory and Development Authority of India (IRDAI), a free look period is essentially a customer-friendly provision in your insurance contract that allows you to stop the coverage and surrender a policy, without paying any surrender charges, if the policy wording or features do not match your requirements. The duration of the free look period is determined by individual insurance companies.
Insurers understand that policy documents and wordings can be confusing for a layman. So, they offer you a free look period to give you time to go through the policy wordings and review the necessary documents. If you find certain features or lack thereof, the inclusions and exclusions, specific company processes, etc., are not to your advantage, you can terminate the policy within the free look period. You will just have to provide the exact reason for terminating the policy.
Let us understand this with an example.
Mr Menon was looking to buy a life insurance policy to secure his family’s future. One of his colleagues, Ms Banerjee, suggested he buy a term insurance plan with a certain company. Trusting his friend’s opinion, he bought the plan. However, while reviewing the documents, he realised there are certain exclusions that do not benefit him.
He had already paid the premium and felt as if he wasted his money and will have to wait another year to change the policy. He discussed this with Ms Banerjee who told him about the free look period in life insurance.
Since Mr Menon was still within the free look period, he could easily terminate the policy and get his paid premium back. He then researched further and found a policy that aligned with his specific needs.
Workings of a Free Look Period in Insurance
An insurance policy is technically a legal document that confers specific rights and responsibilities on both the insurer and the insured. In other words, the provisions of the policy document are binding and if a certain benefit is mentioned in the document, you are bound to receive it.
Sometimes, you may have certain unique requirements from the policy which are not clearly mentioned in the policy document. Or, you were promised a benefit, which is not a part of the policy coverage. In this case, you can contact your insurance company or the agent from whom you bought the policy.
You can ask about the feature or benefit you think is missing from the policy document. You can also use the free look period to ask any necessary questions about the policy, get certain complicated policy wordings clarified or clear any doubts regarding the coverage.
If the insurer or the agent is able to positively satisfy your doubts or queries and the policy offers the exact coverage that you are looking for, you can continue with the policy. However, if you are still dissatisfied or feel the policy wordings do not match the benefits you were promised, you can terminate the policy.
It is mandatory to mention the reason for termination of the policy when surrendering a policy during the free look period.
Importance of Free Look Period in Insurance
We have already discussed why you may end up buying the wrong insurance policy. Incorrect advice from friends, family, agents or financial advisors can leave you with an insurance plan that does not meet your requirements.
Similarly, insurance policies, especially the detailed features, benefits, inclusions, exclusions and policy wordings, can get too overwhelming and confusing for someone who is not too aware of how insurance works.
Therefore, a free look period is important to give you a ‘cool off’ period, away from all the influences of agents, friends or family, just to assess and inspect the policy document by yourself. In most cases, the detailed policy document is provided only after buying the policy, and thus, a free look period provides the opportunity to understand whether the life insurance plan you will be paying a premium for every year matches your needs or not.
As consumers, we inspect, analyse and test each of our purchases. From vegetables to shoes to vehicles to a house, we inspect and try on stuff before parting with our money for it. The same goes for insurance. A free look period is an opportunity for policy assessment where you can check if the benefits and features outlined fit your needs.
Here are Some IRDA Free Look Period Details
- All insurance products have a free look period.
- As a policyholder, you have 15 days to review the policy and terminate it after purchase.
- Cancellation forms are available on your insurer’s website. You need to download and fill them out properly if you are requesting a termination/cancellation in the free look period.
- Ask your insurer regarding the documentation necessary for policy termination. Generally, you are asked to submit the policy contract, the receipt for premium payment and a cancelled cheque.
- If you do not file for a timely refund during the free look period the paid premium minus the charges incurred by the insurer for stamp duty, medical tests, etc. will be paid. In case the risk has already commenced and the option to return the policy is exercised by the policyholder then a deduction of proportionate risk premium for coverage period will be made.
- The refund for ULIPs is different from other insurance products owing to the market-linked investments. As the units are repurchased at the prevailing market rates, there is a possibility of a lesser refund than what you paid.
Life insurance is a critical part of your financial portfolio and hence it is necessary to find the right fit. However, don’t worry if you end up buying the wrong policy. Just make sure you terminate the plan within the free look period in the life insurance plan.
At Tata AIA Life Insurance, we help you find the life insurance fit that is attuned to your financial requirements and life goals. Our experts will guide you through our range of options and assist you in finding the top life insurance plan that satisfies your needs. You can also visit our website and check out the different products and plans.
We provide detailed information about each policy and online life insurance calculators on our website. Additionally, you have the option of downloading the policy brochure and detailed document/policy bond to help understand the nuances of the coverage before you proceed with the purchase.
You can contact our experts at any stage of your purchase and they will help you with any queries or doubts you may have about the coverage.