FREE-LOOK PERIOD AND OTHER IMPORTANT DATES
1. What is a free-look period?
· Every policyholder is allowed a free-look period of 15 days to go through the terms and conditions of the insurance policy, and reverse the decision to buy it if it is found to be unsuitable.
· During this free-look period, the policyholder can choose to cancel the policy, change to another policy or alter the features selected in a policy.
· It is mandatory for all life insurance companies to offer the facility.
· However, the insurance companies can offer products with longer free-look periods too.
· This period starts from the day that the policyholder receives the policy, and not the date of issue of the policy.
· The onus of providing proof of receipt date is, however, on the policyholder.
· Used wisely, this period can enable you to discuss unsatisfactory clauses and exclusions with the insurer for getting the changes made.
· Thus, the free-look period acts as a sturdy shield against mis-selling by agents.
· In case a customer wants to cancel an insurance policy during the free-look period, he should call the customer service department of the insurance company and understand the cancellation process.
· Usually, the customer will be required to send the original documents of the insurance policy and a written application form for its cancellation to the customer service department, or to the local branch of the insurance company.
· It is important to send these documents so that they must reach the company before the end of the free-look period, that is, within 15 days of the receipt of the policy from the insurer, if the customer wants to avail the cancellation option.
· If the policy is cancelled during the free-look period, the premium paid is refunded after the following deductions:
o Cost pertaining to medical tests, if any
o Stamp duty
o Proportionate risk premium (mortality charges) for the period between issuance and cancellation
o Service charges.
· In the case of a Ulip, the company will repurchase the units and refund the fund value, but any increase or decrease in the Net Asset Value (NAV) during the free-look period is borne by the customer.
· This is achieved through additions to or deductions from the premium.
2. What are the important days to take note of?
· You can cancel your policy within 15 days, called ‘free-look period’, of receiving the policy documents.
· No policy can be challenged by the insurance company, for 'mis-statement of facts' by the policyholder, after the expiry of 2 years.
· The ‘grace period’ for making premium payment is typically 15 days from the premium due date for the monthly premium mode and 30 days for other modes of payment.
· For 'revival' of the policy, the insurance company sends a notice to the insured within 15 days of the expiry of the grace period if the premium is still unpaid.
· The policyholder has the 'option of reviving' the policy within 30 days of the receipt of the notice.
· The insurer has to 'respond' within 10 days of the receipt of any communication from its policyholders in all matters.
· The insurer has to 'settle the claim' within 30 days of receipt of all documents, including clarification sought by the insurer.
· If 'further investigation' is required in relation to settlement, the insurer has to complete its procedures within 6 months from the time of lodging the claim.
· For any 'delay in payment', interest has to be paid on the claim amount at a rate which is 2% above the bank rate.