Utilize Free-Look Period Of Your Insurance Policy

As consumers, at times we regret buying products at the later stages. This is generally because as a matter of fact, we start analyzing the product only after we have paid for it. Wouldn’t it be great if you can get some time to understand the product after paying for it? Such an advantage comes with life insurance policies to enable users to decide whether they wish to continue with the current policy or return it.

This time duration is generally of 15 days, with in which you have to take a decision. It is known as ‘free-look period’.

As mandated by IRDA, a policyholder has the right to review policy terms and conditions for 15 days from the date of receipt of policy. If the policyholder is not satisfied with it, or feels that he has been cheated, and wish to cancel the policy, the insurer will be liable to return paid premiums. The only deductions that can be made by the insurer for cost incurred during health check-up, charges towards stamp duty and mortality charge for interim period. In addition to these deductions, in case of ULIPs, the fluctuations in the amount of already allocated units will be adjusted in the settlement. Here, the insurer will has to repurchase the units on the date of cancellation to redeem money and pay the value of units on the cancellation.

But here the question is how to decide on the insurance policy? Most of us are ignorant to the insurer’s jargons and do not know what to look for in an insurance policy. In such circumstances, we advise you to look at the following pertinent points:

1. Names and addresses of all policyholders, life insured, nominee and other persons, if any involved, should be correctly mentioned in the policy. Also, the name and address of guardian, in case of minor, should be there. Here, one needs to give special attention to the spellings of names and addresses.

2. Find out whether the policy you have purchased is a participatory policy or not. If the sales executive has told you that you would be offered bonuses on the basis of company profits, at maturity, the same should be mentioned in the policy. Also, once, you have found out that the policy is ‘with-profits’, it would be intelligent to find out whether the profits are simple reversionary or compound reversionary. In case, you find out any discrepancy in the sales pitch made by sales agent and returns written in brochure or policy document, ask for clarification from the company. In case of unsatisfactory reply, you can abandon the policy straight away, citing the same reason.

3. Check for the policy term and sum assured of the base policy as well as riders from the policy documents and find out if there is any discrepancy in it from the one you have been told before buying the policy.

4. Inclusions and exclusions are also important to be considered in any life insurance policy. Inclusions are the circumstances where the given policy will cover you; whereas, exclusions are areas where it will prove futile. Check and find out whether it suits your condition. For instance, if there are more than one condition, likely to be yours, mentioned in exclusions, the policy will more likely to be futile for you as it will not cover you in those circumstances. In such a scenario, it would be advisable to you to abandon the policy.

5. In addition, voluntary and involuntary deductible is also an area that needs to be studied carefully.  Voluntary deductions are those for which a policyholder is willing to share a percentage of loss; whereas involuntary deductions are those where insurance company asks a policyholder to share the percentage of loss, irrelevant to his/ her willingness. The voluntary deduction also helps in bringing down the premium for the policy as the risk to the insurer is shared with the policyholder. Here, one needs to check whether voluntary or involuntary deductions, specified under the plan, are made as per your knowledge and confirmation or not.

In addition to the above mentioned points, one must also understand the following terms and conditions to ensure smooth policy tenure:

1. Be clear about the claim amount and claim procedure that needs to be followed in order to file claim and get it. In claims’ procedure, everything right from the contact numbers of the concerned department and documents, to the service available by the insurer needs to be cleared out. For instance, in case of filing a claim, will the insurer arrange for a representative at home for document formalities or person needs to visit the branch, etc. It is advisable to clarify doubts, if any, during the free look period rather than regretting later.

2. It is advisable to activate your online account by visiting insurer’s website so that you would be able to check your future transactions and policy worth online.

3. Look for any conditions attached with a policy. For instance, in case, the company will pay premiums on your behalf in case of your death and policy will continue as it is.  It is less likely for a sales agent to tell you that it will happen only if the death occurs after 5 policy years, in case this is the condition. In such a scenario, it becomes important for you to read the policy document carefully and understand the conditions, if applicable in your case.

Once, you have checked all the above mentioned points and found out any discrepancy, it is advisable to talk to your insurer, get clarity and get the policy document corrected, if need arises. However, if the insurer does not agree with you, you can get return the policy with in the free look period. Here, due care should be taken as the application or cancellation form has to be submitted within 15 days of receiving the policy document. The branch may give you a receipt or reference number for your proof.

Most insurers inform you on phone about the status of your cancellation and refund the charges after deducting a reasonable amount pertaining to health check-up cost, stamp duty, mortality charge for interim period.