Definition
Free-Look Period
The free-look period is a window after receiving a life insurance policy during which the buyer can cancel it and get a refund if dissatisfied with the terms.
IRDAI mandates a free-look window (recently standardised to 30 days from receipt of the policy document for all policies) so buyers can review the actual terms and exit a mis-sold or unsuitable product. On cancellation, the insurer refunds the premium after deducting proportionate risk premium for the days on cover, medical examination costs and stamp duty.
The free-look right is a key consumer protection against aggressive selling. For ULIPs, the refund is the fund value plus charges already deducted, adjusted for these expenses. Acting within the window is far cleaner than surrendering later and incurring surrender charges.
Related terms
- SurrenderSurrender is the voluntary termination of a life policy by the holder before maturity, in exchange for the surrender value.
- Cooling-Off PeriodA cooling-off period is a regulated window allowing a buyer to reconsider and cancel a newly purchased financial product without penalty.
- IRDAIIRDAI is the Insurance Regulatory and Development Authority of India, which regulates and supervises the insurance industry and protects policyholders.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.