Insurance is perplexing. There is so much information and hard sell that, ironically, buying a policy feels like taking a shot in the dark. This is a common feeling and many prospective buyers dilly-dally, back off, or simply make a wrong decision, only to rue it over the years or face a loss of the premium paid by allowing the policy to lapse.
If you realise that the policy you bought is not what you thought it was; if you are having second thoughts; if you find that something about the policy has been misrepresented to you; if there has been a partial or total holding back of pertinent information, don’t worry, all is not lost. There is a second chance to exit this policy and buy a more suitable one.
Enter the Free Look option, available on all life insurance policies. On health insurance policies it applies if the period of insurance is not less than one year. This provision offers a sense of relief and a real way to deal with an unwanted policy purchased in error, but this should only be your very last resort. Nothing substitutes for good research and information before deciding which policy to buy and which terms, conditions, exclusions and premium burden are best suited to you.
Free look cancellation of life insurance policies is a provision in the Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulation, 2002 (amended in 2017). In life insurance, how does the free look option work?
The insurer has to inform you about this option in his covering letter when he delivers the policy to you. From the date you receive the policy, you have 15 days to review and return the policy for cancellation. If it is an electronic policy or one bought through distance mode, you have 30 days.
You should make a written request to cancel the policy under the free look period if you disagree with any of the terms or conditions of the policy.
You need to mention the reason for the objection and you will be entitled to a refund of premium, subject to certain expenses, including risk premium for the period already covered and expenses like medical examination before the policy was issued and stamp duty charges. All this comes into play only if you have not made any claim during the free look period.
You should receive your premium refund within 15 days of your insurer receiving the cancellation request. If there is a delay, you are entitled to interest on the refund amount. If the life insurance policy being cancelled is a unit-linked product, the insurer would be entitled to repurchase the units at the price on the date of the cancellation.
If you are cancelling a health insurance policy, you are entitled to a 15-day Free Look period only on inception of the policy, and not during renewals. All health policies like indemnity policies and benefit policies, namely critical illness plans and personal accident policies, are covered under this option.
(The writer is a business journalist specialising in insurance & corporate history)