This helps people who after buying a policy find out that the policy terms and conditions do not suit their needs. However, the cancellation and return of the policy to the insurer have to be done within the free look period, to get a refund from the policy.
Insurance overall is a pushed product in India. This means the insurance product is pushed to policyholders through various channels. Due to this, most people buying a policy lack the proper understanding of the insurance product and end up choosing the wrong policy. There are many policyholders who hold the wrong policy and are still paying a premium for it.
To help policyholders in such situations, insurance regulator IRDAI has brought in a consumer-friendly provision — the free look period – wherein, if a policyholder has bought a policy and then realizes he does not want it, he can return it and get a refund for it.
Rakesh Goyal, Director, Probus Insurance Broker, says, “This way policyholders with policies that don’t meet their needs will not have to worry about being stuck with the policy or the loss of the premium paid for the policy.” This especially helps people who after buying a policy find out that the policy terms and conditions do not suit their needs. However, the cancellation and return of the policy to the insurer have to be done within the free look period, to get a refund from the policy.
Here is how the free look period works:
Even though the free look period was introduced to help policyholders, it comes with certain conditions. For instance, all insurance policies do not have a free look period option. The free look period usually applies to life insurance policies and certain categories of health insurance policies only. Currently, other insurance policies do not have the provision of the free look period.
Goyal of Probus Insurance says, “An insurance policy with a free-look period usually offers 10 to 15 days to review a newly-issued policy. If the terms and conditions aren’t acceptable to the policyholder, this way they can return the policy during the free-look period and the insurance company pays back the premium.”
Some insurance policies bought online offer a free look period of 30 days after receiving the policy document. The policyholder if unsatisfied with his/her policy and wants to return it, needs to inform the insurance company in writing, it should not be communicated orally. Doing so may not be enough.
However, note that the insurance company pays back the premium after deducting certain expenses such as the medical examination expenses if any, tax, and any other charges. As per the IRDAI guidelines, the insurer reserves the right to deduct the expenses incurred, if any, on medical examination.
In the case of ULIP policies, the refund is based on the NAV (unit value). Some insurers also deduct stamp duty charges and then pay the net amount post these deductions to the policyholder’s registered bank account.
To avoid facing such situations, it is better to take an expert’s advice, be it from a financial advisor or an insurance expert, before opting for a policy.