How to Cancel a Life Insurance Policy Within the Free-Look Period?

November 29, 2021 Mutual Fund

Do you know that if for any reason you are not satisfied with the life insurance policy you have recently bought, you can simply cancel it and get your premium amount back?

Yes, you can cancel your term insurance policy or whole life insurance policy within a free-look period of the policy mentioned on the policy document.

Let’s understand what a free-look period is:

• Free-look period is available on all types of life insurance policies, such as term plan, whole life insurance plan, etc.

• The free-look period of your life insurance policy starts right from the day you receive the policy documents.

• The Insurance Regulatory and Development Authority of India (IRDAI) mandates the life insurance companies to offer a minimum free-look period of 15 days to the insured. Besides, if the policy is sourced through a distance or electronic mode, the mandatory minimum free-look period extends to 30 days from policy inception.

Here are steps to take if you want to cancel your life insurance policy within the free-look period:

1. Request for Cancellation:

The first step is to send a written request for the cancellation of the life insurance policy to the insurer. Many insurers accept online cancellation requests too. However, if your insurer does not accept an online request for the cancellation of the policy or if you are unsure whether your online request will be accepted, you should submit a hard copy of your written request to the nearest branch of the insurance company and take the acknowledgement of it. For a speedy process of your request, you should mention the policy details, such as the name of the plan, policy number, name of the insurance agent, the reason for policy discontinuation, etc. on the cancellation request.

2. Wait for the response from the insurer:

Once the insurance company receives your request, a customer service representative will give you a call on your registered number to try to resolve the issue for which you have given a policy cancellation request. The insurance company will try to retain you, but if you are firm on your decision, they will proceed with policy termination. You will get an intimation of the status of your policy cancellation request on your registered email id or mobile number.

3. Track the refund of premium:

The IRDAI states that if the insured has not made any claim during the free look period, the insured shall be entitled to:

• A refund of the premium paid less any expenses the insurer has incurred on medical examination of the insured persons and the stamp duty charges or;

• where the risk has already commenced and the option of return of the policy is exercised by the policyholder, a deduction towards the proportionate risk premium for the period on the cover or;

• Where only a part of the insurance coverage has commenced, such as proportionate premium commensurate with the insurance coverage during such period;

• In respect of unit-linked policy, in addition to the above deductions, the insurer shall also be entitled to repurchase the units at the price of units as on the date of return of the policy.

Once your cancellation request is approved, your refund will be processed to your registered bank account. However, due to some reasons, if the direct money transfer is not possible, the insurance company issues a Demand Draft (DD) that can be deposited into your bank account. Remember that you will receive the refund of the premium after deduction of non-reversible charges, such as stamp duty, medical check-up fees, etc.

Here are a few tips for you if you are proceeding to cancel your life insurance policy:

1. Listen to the Confirmation Call/Welcome Call carefully:

The life insurance company will give you a confirmation call or welcome call when you purchase a policy from them. The representative of the insurance company explains all the details of the policy you have purchased on this call. If you feel your insurance agent had not provided some crucial details or there had been any miscommunication, you can clear your doubts with the insurance representative. You can tell them immediately if you are not satisfied with the policy features and want to cancel the policy. This will save a lot of your time and money.

2. Do not sign on back-dated delivery date:

The 15-day free-look period of your life insurance policy starts right from the day you receive the policy documents. Therefore, before you sign on the receipt, it is necessary to check the date of delivery. If you sign on the back-dated receipt, your free-look period will have started from the delivery date mentioned on the receipt and you could lose your chance of terminating the policy within the free-look period.

3. Know the refund you are entitled to:

As discussed in the third point of the policy cancellation process, take the time to understand the refund process and how much you are entitled to receive to avoid any disputes beforehand. You will receive a refund of the premium after deducting the stamp duty, mortality charges, and medical examination fees. The mortality charges are applicable when the risk cover has already come into effect. Hence, before terminating the policy, the proportionate risk premium for the period is deducted by the insurance company. Furthermore, if you have purchased a unit-linked insurance plan, the units allotted will be repurchased by the insurance company at the Net Asset Value (NAV) on the day your policy gets cancelled.

4. Get the acknowledgement:

When you decide to cancel the policy, you should get in touch directly with the insurer by calling their customer care to understand the process. If you try to cancel the policy through the agent, he/she might try to avoid cancelling the policy because if the policy gets terminated, he/she will lose the commission earned on it. Therefore, it is advisable to submit a hard copy of the policy cancellation request to the nearest branch of the insurance company and ask for the acknowledgement of it. The acknowledgement slip will serve as proof that you have submitted the request and also help you track the request.

To Conclude:

For any reason, if you decide to cancel the life insurance policy within the free-look period, you should speak directly to the insurer. Follow the steps and tips discussed in the article for a successful cancellation of your policy.

This article first appeared on PersonalFN here