What Is Free Look Period: Meaning And Benefits

Before you decide to purchase your insurance policy, you need to be aware of the policy terms and conditions. Without understanding the terms, you may end up paying a higher premium, or not avail of major benefits. IRDAI offers every insurer a consumer right by first looking into the policy closely, and obtaining information about it before buying it. Let’s get to understand it in closer detail.

What is Meant By Free Look Period?

A free look period is a specified period that gives an insurer the right to obtain information about the insurance policy without paying for the surrender charges. Moreover, you also get your insurance premium refunded during the free look period if you do not proceed with the insurance policy. According to IRDAI regulations, this insurance cancellation period lasts for 15-30 days. This is done to let the policyholder understand if the policy is the right investment for them, which promotes transparency of actions. In case the insurer goes for insurance policy withdrawal at a later stage, they may have to pay a higher penalty fee. Also, the insured may choose an insurance policy that does not meet their insurance requirements if there is no scope for inquiring in details about the policy, which is why a free look period in health insurance exists.

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Explanation With Example

Let’s cite an example to understand why reading terms and conditions is vital.

Mr. Bhushan, who owns a plastic manufacturing company in Pune, is a new-age entrepreneur who purchased a personal health insurance plan for himself, as he was advised for insuring his health by his family physician. As per the guidelines of the product, the insurance company provided 15 days for free look period from the day Mr. Bhushan received the policy documents. During these 15 days, Mr. Bhushan had the opportunity to check the coverage details of the plan. He did that, and found that his expectations are aligned with the policy, so he thought to retain the policy and continue with it.

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Major Benefits of Free Look Period

A free look period in insurance provides multiple benefits to the policyholder as well as the insurance provider.

Benefits for Policyholders

• It helps the policyholder to make better financial decisions in terms of investment
• Gives the policyholder the right to inquire about the policy
• Helps the policyholder to know the exclusions well before moving on with the policy
• Let the policyholder set realistic expectations from the insurance coverage
• Allows insured to compare various policies across different providers

Benefits for Insurance Provider

• Reduces incidences of insurance policy termination
• Lowers cases of claim repudiation
• Improves claim settlement ratio
• Develops highly transparent communication with policyholders

Free look time serves as an arrangement between the insured and the insurer that lowers all types of miscommunication. Moreover, the insured does not feel being manipulated or misled by the insurance provider by setting clear goals.

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The Main Purpose of a Free Look Period In Insurance

A free look period in life insurance serves as a major opportunity for the insured to magnify the details of the policy before proceeding. The free look period serves as a guideline to promote insurance clarity so that the policyholder gets a true understanding of the insurance policy. The main purpose is to involve customer awareness among the policyholders, hence free look time is added by IRDAI as part of the mediclaim policies. A clear reason for insurance policies to come up with a free look period is to allow a good amount of time for researching the policy and comparing it with several plans. Within 15-30 days, the policyholder can deeply inquire about the entire policy details and form a better insight. This is the reason why the free look is also known as the inquiry period.

How Does the Free Look Period Work?

The insured opts to select a specific insurance provider and chooses the premium. After purchasing the plan, the free-look tenure starts.

Tenure duration

The free look period in insurance time lasts between 15-30 days and begins when you purchase a mediclaim policy. The period starts after getting the policy, as soon as the insurer gets notified of the purchase.

Review of policy documents

After your free look tenure starts, you have to start inquiring about the policy in detail. Getting to know the actual policy wordings and understanding the exclusions should be your priority within the policy return period.

Cancellation tenure

In this time, you can opt for insurance policy cancellation, or may decide to keep up with the policy. If you choose to cancel your policy, you need to contact your insurance provider and submit the policy receipt along with the policy number. You also have to submit your reasons for canceling the policy.

Refund process

The process of refund starts only after submitting the request to cancel your policy. If your reason is found justifiable by the insurer and if the documents submitted are all in place, you can expect the refund of your first premium as you are still within the free look period in insurance policy. However, your refund will have deductions such as stamp duty, medical examination fees, and a few more. A detailed explanation of deductions will be mentioned by your insurer.

Easy Steps For Policy Cancellation Within the Free-Look Period

If you have decided to cancel your health insurance, make sure that you are already in your free look period. This is important, because if you cancel your policy after the expiry of the policy, you may not get refunded. Here are some primary steps you can take to cancel your policy within the free look time.

Contact Your Insurance Provider

The first step is to contact your insurance provider and submit a request for the insurance policy termination. You have to submit your reason for cancellation along with the documents. In case you have purchased the policy from a broker, you should be connecting with your broker first and ask for cancellation.

Endorsement of Your Insurance Policy

If your insurance provider can endorse your policy by making a few changes, your policy may not get canceled. In case of endorsement, your insurance policy undergoes a few amendments in terms of add-ons, which makes the policy more suitable.

Check for Refund Process

The refund process can take a bit of time, sometimes weeks. You have to keep close communication with your insurance provider or your broker to always update for the refund process. You can follow up for a refund within 3-4 days after submitting for the refund.

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Steps To Cancel Policy After Free Look Period

Mrs. Joshi holds a mediclaim insurance of ₹4 lakhs, but two months after purchasing the policy, she decided to ask for policy cancellation. Her free look period has expired, so what now? Here are some steps that she can follow to get a smooth policy cancellation.

Choose Policy Surrender

If you are going for voluntary insurance policy cancellation, then you need to surrender your policy first. Surrendering is a cancellation before the expiry of the policy tenure, so you may request your insurance provider to surrender. You have to fill in the policy surrender form to get started.

Wait For Your Request To Be Processed

Your surrender request will be processed, which may take some time. Depending on the insurer, it can be a few weeks before you get notified of your request for approval.

Pay Surrender Charges and Other Deductions

Your premium will be written off to the surrender charges if you choose insurance policy withdrawal before the maturity period. This is a way of self-adjusting the extra charges that the insurance company provides.

Check in With Your Bank

Check with your bank to receive any updates in case your surrender value has been credited to your account. You can also check in with the broker to check for any updates, as sometimes the bank notifies you of the credit amount later.

Conclusion

The free look period is a must-check for anyone who has purchased a policy or a mediclaim. Without knowing about these details, you may lose out on selecting a policy that is not ideal for you. The purpose of free look time is to allow individuals and businesses to make informed decisions and not haste with a policy. IRDAI has mandated this solely because it allows a policy cancellation window to every policyholder as a means of consumer rights. Communicate with your insurer to know the days of free look time, and ensure that you inquire about the policy within this timeline.