How to Cancel Life Insurance Policy During Free-Look Period and Get a Refund?

If you feel that you are not happy with the life insurance policy that you purchased, you can simply cancel it and get the full premium amount refunded. Let’s learn more about this feature.

A life insurance policy is literally like a lifeline for your loved ones, safeguarding their financial interests even when you won’t be around to take care of them. This is why buying life insurance is one of the best things you can do in your lifetime. However, purchasing the plan does not mean that you are bound to stick with it forever.

As a policyholder, you do have the choice to cancel your term life insurance anytime if you are dissatisfied or unhappy with your plan. In this case, all you need to do is get in touch with your insurance company and request for policy cancellation. Alternatively, your policy would also get canceled if you stop paying the premium completely.

Note that the cancellation policy of every life insurance policy varies from insurer to insurer. Therefore, it would be wise to read your policy document carefully at the time of purchase to understand the cancellation terms and conditions. Also note that there may also be cancellation fees involved in some cases.

In any case, if you wish to cancel your life insurance plan, you can do so within the free-look period. Let’s learn more about what it is in the section below.

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Free-Look Period in Life Insurance

The free-look period refers to the time duration granted in every life insurance policy to the policyholder, allowing them to cancel the plan if they so wish. Here are the basic features of the free-look period in life insurance:

• The free-look period comes into effect from the very day that the life insurance policy is purchased by the insured.
• This period is granted on all kinds of life insurance plans. These include whole life insurance policy, term life insurance plan, and the like.
• The free-look period must cover at least 15 days. The IRDAI obliges all insurance providers to offer this minimum duration to all policyholders during which they may consider cancellation of the policy in case of any change of plans on their part.
• This period can be extended up to 30 days from the time of the policy inception if the life insurance plan is derived through an electronic medium or over long-distance.

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

It is fairly simple to cancel your life insurance plan within the 15-day free-look period by following these steps:

1. Filing request for policy cancellation: You can either request your insurance provider in writing or submit an online request on their website. Your request for cancellation of life insurance should include some essential details pertaining to your plan. These would include the name of the policy that you bought, the insurance agent’s name, the policy number, and the reason for plan cancellation.
2. Receiving status update from insurer: Upon receipt of the cancellation request, a representative from the insurance company would call you to discuss the reason for canceling the policy. He/she would make an effort to resolve any issue/challenge that you may be facing in this regard. However, if you have finally decided to cancel the plan, you can convey the same to the insurance representative, who would then begin the process of termination of the policy.
3. Receiving refund: The final step as part of the life insurance policy cancellation rules is to receive the premium refund from the insurer. As per the regulations of the IRDAI, the policyholder is entitled to receive a return of the premium paid to the insurer only if they have not filed any claim during the free-look period.

Note that the premium refund payable by the insurance company also takes into account any costs incurred by the insurer for payment of stamp duty or cost of medical tests conducted for the insured.

After making these necessary deductions from the premium payable, the insurance company would approve your cancellation request. Now the amount to be refunded would be directly transferred to your bank account.

Why Would the Policyholder Need to Cancel Life Insurance?

There can be a number of reasons why the insured might go in for a policy cancellation:

1. A change in the objective of the policy, i.e., the reason for which the policy was initially purchased has changed.
2. The premium amount to be paid by the insured has become unaffordable.

In either of the two scenarios, a policyholder can request for cancellation of the life insurance policy.

Is it a Good Idea to Cancel Your Life Insurance Policy?

Actually, No. While it is understood that in either of the situations detailed above, the policyholder can file for a cancellation of the policy with their insurer. However, it is generally not recommended to cancel your life insurance plan. This is because if you discontinue your policy, the most affected would be your family and loved ones. Life insurance is meant to offer financial protection to your family in your absence (after your death). By discontinuing the policy before the expiry of its term, you would be depriving your loved ones of this facility.

This is also why most insurers would try their best to retain the policyholder, convincing the latter of any thinkable alternatives.

Read More: You Should Not Cancel Your Term Life Insurance Policy – Learn Why

Summing it Up

Even though canceling your life insurance policy can have its implications (mostly unfavorable) in the long run, this decision would entirely depend on you, the policyholder. And once you have made up your mind, the procedure to get your policy canceled is fairly simple. Just follow the steps detailed in this blog and you’d be done discontinuing your policy before you even realize it.