Even as the Insurance regulator has not fully implemented its surrender value proposal, it has notified the 30-day free look period for life and health insurance policyholders.
However, after returning a policy during the 30-day Free Look Period, don’t expect to get get full amount you paid initially as refund. The insurer can deduct proportionate risk premium and other charges! Read on for details.
In a Gazette notification dated March 20, the Insurance Regulatory and Development Authority of India (IRDAI) announced the rule for implementation of 30-day Free Look Period:
“Every policyholder of life and new individual health insurance policies, except for those policies with tenure of less than a year, shall be provided a free look period of 30 days beginning from the date of receipt of policy document, whether received electronically or otherwise, to review the terms and conditions of such policy,” the IRDAI said.
The regulator has asked insurance companies to inform “clearly and explicitly” to the policyholder about the availability of the free look period.
When and how to return a policy
According to the notification, a policyholder can return the policy within 30 days if s/he disagrees with policy terms. The policyholder will also have to state the reason for which s/he is returning the policy.
“In the event a policyholder disagrees to any of the policy terms or conditions, or otherwise and has not made any claim, he shall have the option to return the policy to the insurer for cancellation, stating the reasons for the same,” the IRDAI notification said.
How much refund is allowed during Free Look Period
The insurance company has to refund irrespective of the the reasons mentioned by the policyholder. Further, the insurer can deduct a proportionate risk premium for the period of cover and expenses, if any, incurred by the insurer on the medical examination and stamp duty charges.
“Irrespective of the reasons mentioned, the policyholder shall be entitled to a refund of the premium paid subject only to a deduction of a proportionate risk premium for the period of cover and the expenses, if any, incurred by the insurer on medical examination of the proposer and stamp duty charge,” IRDAI said.
What about return of ULIPs?
“In respect of a linked insurance product, in addition to the deductions mentioned above above, the insurer shall also be obligated to repurchase the units at the Net Asset Value (NAV) of the units on the date of cancellation, the regulator said.
How much time will it take to get refund?
According to the notification, a request received by insurer for cancellation of the policy during free look period shall be processed and premium shall be refunded within 7 days of receipt of such request.
The IRDAI had proposed 30-day Free Look Period for Insurance policies last month.
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Disclaimer: The above content is for informational purposes only. Please consult your financial advisor before investing in any scheme.
