Free Look Period

Health insurance is a crucial safety net that provides a financial cushion during a medical emergency. However, most people buy health insurance without understanding the product and its features and later regret buying a policy that does not match their requirements. To safeguard the interest of a policyholder in such a situation, IRDAI has made a provision of a free look period for the policyholder, during which he can opt out of the policy if not satisfied. This saves the policyholder from being stuck with the policy and losing the money paid for the premium.

In this article, we will discuss in detail the concept of the free look period, its features, benefits, limitations, and more.

What is a free look period in Health Insurance?

A free look period in health insurance is an initial cooling-off period after purchasing the policy. During this period a policyholder can review the features, inclusions/exclusions, and terms of the policy. If he is not satisfied with the terms and conditions, he can terminate the policy within this period and get a refund.

To terminate the policy, a policyholder must notify the insurer in writing stating the reason for cancellation. To receive a full refund the policy should be cancelled within the free look period only. Remember that an insurer may deduct some basic charges from the refund amount. The duration of the free look period is decided by the insurer and is generally 15 or 30 days. All policyholders who have bought a new health insurance policy are eligible for a free look period.

How does a free-look period work?

The free look period starts from the day when the policy is received by the policyholder. The insurer has 15 or 30 days to review the policy terms and conditions and if not acceptable, he can terminate the policy within the free-look period and get a refund. The insured needs to provide a valid reason for termination along with the policy contract and relevant documents. The insurer then reviews the termination request. If the request is approved the insurer will initiate the refund.

The insurer refunds the premium amount after making certain deductions;

For the coverage period, a proportionate risk premium is deducted.
The cost of medical tests incurred by the insurer.
Stamp duty charges

Key features of the free look period

Following are the key features of the free look period.

The free look period is available only for health insurance policies with a minimum term of 3 years.
The free look period provides sufficient time for the policyholder to evaluate the new policy, 15 days for a regular policy and 30 days for an electronic policy or policy sourced through distant mode.
During the free-look period, a health insurance policy can be terminated easily through online mode.
Cancellation or policy during the free look period does not require a lot of documentation and it only requires premium payment receipts, cancelled cheques, and any other document needed by the insurer.

Benefits of the free look period

A free look period was introduced for the benefit of the policyholder.

It protects the policyholder against misselling and unfair practices by the insurance companies.
It saves you the money spent on the wrong health insurance policy.
It gives you an opportunity to thoroughly go through the terms and conditions of your policy and understand the nuances and lets you exit if the policy is not suitable for your needs

Why should you consider a free look period?

There are a number of reasons why you should consider a free look period to cancel your health insurance policy.

Your policy doesn’t fulfil your needs
Once you receive your policy, you go through the contract and read its terms and conditions. You realise that the terms don’t match your needs. In such a situation you should consider a free look period to cancel the policy.
Sudden change in financial situation
If there is a sudden change in your financial situation, and your existing policy no longer fulfils your needs, you can cancel it and look for a more suitable plan. These sudden changes can be losing your job or receiving money.
Better coverage is available
If you find that another insurer is offering better coverage at a lower price, you would want to change your plan. You can opt out of your existing plan to purchase the plan with better coverage at a more affordable premium.
Change in employee benefits
In case your employee policy coverage is enhanced and you are getting better coverage without needing any additional cover. You may cancel your newly purchased health insurance policy.
Limitations of the free look period
The Free look period is a provision with a number of benefits. However, it has certain limitations. Understanding these limitations can help a policyholder make an informed decision.
Limited timeframe
The Free look period gives a limited time frame to the policyholder for evaluating the terms and conditions of the policy. In case of a complex policy, a period of 15 or 30 days may not be sufficient and the policyholder may miss the opportunity to cancel the policy.
Not recommended to make a claim
Generally, policyholders are recommended not to make any claims during the free look period. This is because making a claim during this period complicates the cancellation process and you get a refund after deducting the claim amount.
Limited applicability
The free look period is not applicable to all insurance policies. Also, you can cancel a newly purchased policy only. It is not available at the time of renewals or during porting. Its applicability depends on the insurance company.
Delayed refunds
The free look period allows you to cancel a policy but it does not ensure an immediate refund of the premium amount. A delay in refund may leave the policyholder without coverage for a certain period.

What charges are deducted if the health insurance policy is cancelled within the free look period?

If the policy is cancelled within the free look period, the premium amount is refunded. However, certain deductions are made from the refund amount.

A pro-rata risk premium is deducted for the number of days the coverage was provided to the policyholder.
The cost incurred by the insurer on stamp duty and administration expenses
The cost incurred by the insurance company on conducting a pre-policy medical test is also deducted.

Policy cancellation after the free look period

In case you miss the free look period to cancel the policy but still want to cancel, you can go for policy cancellation after the free look period. However, depending on the time lapsed after the free look period, you will get a certain percentage of the premium amount as a refund and not the full amount.

Within 1 month after the free look period
If you apply for policy cancellation within 1 month of the completion of the free look period, you are eligible to get a 75% amount of the premium as a refund.
Within 3 months after the free look period
If you apply for policy cancellation within 3 months of the completion of the free look period, you get a 50% refund of the premium amount.
Within 6 months after the free look period
If you apply for policy cancellation within 6 months of the completion of the free look period, you get a 25% refund of the premium amount.

It is important to note that once you have completed 6 months after the free look period, and you wish to cancel the policy, you will not get any refund from the insurer.

Here's the step-by-step procedure to cancel a policy within the free-look Period

Before you decide to cancel your health insurance policy, check the duration of the free-look period of your policy in the policy document. This duration may be different for different insurers. You can cancel your policy either through online mode or offline mode.

Offline Mode – To cancel the policy offline, you can contact your insurance advisor or visit the nearest branch of the insurance company. You can also contact the customer care to initiate the cancellation process.
Online Mode – Visit the official website of the insurance company and fill out the cancellation form. You can also write a mail to customer care to initiate the cancellation process.

You can follow the steps given below to cancel your health insurance policy during the free look period.

Submit the cancellation request
Fill out and submit the cancellation request form with all the necessary details. You need to provide the following details.
○ Details of the policy
○ Date of receiving the policy document
○ Details of insurance agent (if applicable)
○ Reason for cancellation
○ Bank account details for the refund
Verification of cancellation request
Once the insurer receives the cancellation request, verification of all the details and documents is carried out. The insurer may try to provide a solution at this point.
Receiving the refund
In case, you do not wish to continue and go ahead with the cancellation, the insurer will process the refund and the amount will be credited to your account within 7 to 10 working days.

Important points to remember

Here are some important points regarding the free look period, you should remember.

Check the duration of the free look period of your policy in the policy document.
You need to provide proof of the date of receipt of the policy document at the time of submitting the cancellation request.
To initiate the cancellation, either submit a handwritten cancellation request or fill out the cancellation form available on the insurer’s portal.
Check the list of details and documents required to submit a cancellation request on the official website of the insurer.
You will not get a 100% refund even after the cancellation of the policy is done during the free look period. Certain basic charges are deducted by the insurer.
Porting is not allowed during the free look period.
You do not get any free look period at the time of renewal.

Grace Period v/s Free Look Period

Grace Period: The grace period is the extra time after the due date, given by an insurance company to its policyholders to help them pay their outstanding premium without paying any penalty. It often happens that a policyholder misses the due date of the premium payment either because of a lack of funds or simply because he forgot the due date. In such situations, the policy gives you a grace period to make the outstanding payment.

○ Depending upon the insurance company, a grace period may range from 15 to 30 days.
○ During the grace period, your policy does not lapse.
○ Any claim made during the grace period is not paid until you pay the premium.
Free Look Period: The free look period is the initial 15 or 30 days after receiving the policy document when a policyholder is entitled to cancel the policy and get a refund of the premium amount. If a policyholder is not satisfied with the terms and conditions of his policy after purchasing it, he has this free look period to opt out of the policy and get a refund of the premium paid.

○ A free look period is available only at the time of purchase of the policy.
○ A policyholder gets a refund after certain deductions such as stamp duty, administration charges, and risk premium for the coverage offered till the policy is cancelled.

Let us see how a grace period and a free look period differ from each other.

Grace Period	Free Look Period
It is an additional period given to pay an outstanding premium after the due date has passed.	It is the initial period after purchasing the policy where a policyholder can cancel the policy and get a refund of the premium paid.
Premium is paid	Premium is refunded
A grace period is applicable whenever the premium is to be paid. For example, at the time of policy renewal.	A free look period is applicable only once after the purchase of the insurance policy.

Conclusion

The free look period offers a great opportunity for the policyholder to thoroughly review the terms and conditions of their policy and get a refund of their money without paying any penalty. It encourages the policyholders to make informed decisions and understand the terms and conditions of health insurance policy. However, never make a decision to cancel the policy in haste without a proper reason because you need to provide a reason for cancellation so that your cancellation request is verified and accepted. Always provide a valid reason for cancellation to get your application accepted.

Frequently Asked Questions

No, there is no provision for an extension of the free look period in the health insurance policy.

Yes, you can terminate your policy after the free look period is over. However, you will not get a full refund of the premium amount.

The free look period starts from the day of receiving the policy document.

No, the free look period is not applicable at the time of policy renewal. It is available only at the time of new purchase.

You need to provide the date of receipt of the policy, the reason for cancellation, and bank account details at the time of policy cancellation.

To cancel the policy during the free look period,

Contact your insurer and submit a written cancellation request
State the reason for the cancellation
Provide all the required information
Once the cancellation request is approved you will get the refund amount

You can cancel the policy during a free look period only if you have not filed a claim because if you have filed a claim getting a cancelation request approved becomes difficult and you also do not get the refund amount.

A policyholder can cancel the policy during the free look period because of a change of mind, because of a change in financial status, or because better coverage options are available.

IRDAI has made a provision of a free look period to protect the policyholders from unfair practices. It also gives the policyholder an opportunity to thoroughly understand the terms and conditions and features of a policy and make an informed decision.

The duration of the free look period depends on the insurance company. It is generally 15 or 30 days starting from the date of receipt of the policy.