Which is true about the 10 day free look period in a life insurance policy?

An extra window of time to review your policy and ask questions could make a big difference in helping you remain satisfied with your coverage.

Updated June 30, 2022

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Table of Contents

• How Free Look Periods Work
• What to Do During Your Free Look Period

Table of Contents

• How Free Look Periods Work
• What to Do During Your Free Look Period

When it comes to important financial decisions like life insurance, it's critical that you get exactly what you need — like the right coverage. A "free look period" allows you an extra opportunity to make sure you've done just that. By law, you generally have the opportunity to review your new policy in order to help make sure it's a good fit for you. That option is a little like a safety net: hopefully not necessary, but there to protect you anyway. It can also be a time to continue working with your financial representative to address any additional questions or needs you may have.

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How Free Look Periods Work

A free look period is a consumer-protection feature of modern life insurance policies. As a buyer, you have the right to cancel a policy within a specified number of days for any reason. If you do so, your insurer must return any premium payments to you without surrender charges. A free look period starts when you receive your policy and typically lasts for 10 days, but that number can vary by state. States often set their own limits, which can differ greatly.

Free look periods benefit the consumer by providing this opportunity to return the policy for a full refund. As this period is limited, however, it's important to remember that after the period has passed, the only way to cancel the policy would be in compliance with policy provisions, which may include surrender charges.

What to Do During Your Free Look Period

You're probably already familiar with the essential features of your insurance coverage. But your policy contains every provision, including things you may not have considered. Once you have the policy, you have a chance to review every detail and learn more about your coverage.

When you receive your policy, you should read through it, and if you have any questions about your coverage or policy provisions, raise those with your financial representative during the free look period to help ensure that you understand and want to keep the policy. Such a review will enable you to receive a refund of premiums, and possibly switch to another product that better suits your needs (before the free look period ends and surrender charges would apply).

If you want to cancel, notify your insurance company or financial representative immediately. Ask what requirements you need to meet to use this feature of the free look period.

Overall, free look periods are a win for consumers. Because while this extra period of review could prove useful if any complications crop up, the goal is for you to end up with coverage that works for both you and your family.

It’s not an uncommon occurrence to see people applying for an expensive life insurance policy and then immediately regretting their purchase afterwards. If you find yourself in this situation: don’t panic. There’s an easy way out of this predicament.

Most life insurance policies come with a “free look” period which entitles policyholders to a right of rescission. This period lasts for 10 days immediately following the delivery of your policy. During the free look period, you’re allowed to contact your insurer and cancel your purchased policy at any time without being subjected to fees or penalties. The seller is also obligated to completely refund any money paid towards the policy. This includes payments made towards premiums, deposits, etc.

All insurance companies that are members of the Canadian Life and Health Insurance Association (CLHIA) are expected to include a 10-day free look period in their life insurance products. However, you’re still recommended, to be on the safe side, ask your insurance agent or broker about the availability of this period before making a purchase.

How The Free-Look Works

According to the CLHIA, the 10-day period for an insurance policy starts five days after the policy documents have been mailed to the policyholder. If the policy has been sent to the policyholder via email, fax or another form of instant communication, the free look period begins on the date the transmission was sent.

To cancel your insurance policy during this period, you have to write a letter to your insurer stating that you are cancelling your policy within the free look period and would like a full refund. The insurer then has to comply with your demand within a reasonable amount of time.

It’s worth noting that group insurance contracts, annuity contracts, contracts where the amount of insurance exceeds $2 million and credit protection insurance don’t include this period. Travel, accident and sickness insurance policies for a term under six months or less usually don’t have a free look period either. Insurance policies negotiated as part of a benefit plan in which participation is mandatory also aren’t eligible.

A life insurance policy contract can cost you a significant amount of money and lock you in for multiple years. Opting out of a permanent policy outside of the “free look” period can result in heavy surrender fees and the loss of previously paid premiums.

Because of these aforementioned factors, buying a life insurance policy can be a huge decision for both you and your family. Therefore, it’s highly recommended that you do your research and look around for comparable policies from several insurance providers or speak with an independent life insurance broker before making a final decision.

If a deal sounds too good to be true, it usually is.

Unfortunately, many people don’t follow this advice and are quick to sign policy delivery receipts without being aware of all the key details. This often happens when applicants blindly listen to a pitch from an insurance agent and don’t read the fine print for themselves before committing to a purchase. Keep in mind that these insurance agents aren’t always looking out for your best interests. Many of them are simply out to make money by locking you into a contract that’s more lucrative for them than it is for you. Anytime an insurance agent presents you with a life insurance policy, don’t hesitate to ask questions to ensure you are making an informed decision.

As soon as you do purchase a life insurance policy, you’re advised to take advantage of the free look period by going over the policy and understanding all the details. While you can review the policy yourself, it’s a much better idea to consult a third-party financial adviser and have them go over and approve the policy.  If you happen to have more questions after your policy is finally delivered, follow up with your broker to get them sorted out before the 10-day period is up.

At the end of the day, the free look period is a very important safeguard to protect customers looking to buy a life insurance policy. Make sure you’re aware of this safeguard and know how to take advantage of it if you need to. If a life insurance policy that you’re considering to purchase doesn’t come with a free look period, then you’re highly recommended to walk away from the deal.

If you are looking for more information, visit this page on the 10 quick tips on buying life insurance.

What is a free look period for life insurance?

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