What Is a Free Look Period?
When we talk about free look periods, we are talking about the length of time an insurance policy owner can walk out of an insurance contract without paying penalties and surrender charges. Insurance policyholders can weigh if the insurance fits their likings or terminate the contract due to valid reasons like lack of satisfaction or disagreement with some terms and conditions of policies, and then get a full refund. In short, this is a “testing stage,” usually for life insurances, and it gives insurance policyholders time to think and decide whether to continue or walk away from the contract agreement. A free look period differs from one state to another, but usually, it lasts anywhere from ten days or more. All of the 50 states require free look periods for the benefit of the insurance policyholders.
More details on free look periods
In the 1930s to 1940s, people tried to avoid availing life insurances because of scams and deceits. Albeit having life insurances, people did not receive any claims when they got sick or died.
Later on, the government took action and got involved since there were many complaints. Today, life insurance massively improved due to the legislation’s involvement and free look periods. The negative impression about life insurance is slowly fading away.
As mentioned earlier, free look periods vary from one state to another, especially when it comes to time frames. Right after receiving the policy, let’s say the insurer gave ten days; in ten days, you can ask anything that you’d wish to know for further understanding. Suppose you decided to cancel the insurance plan. In that case, you must notify your insurer, and the refund may either amount to the account value during cancellations or else the payment quantity depending on the policy’s jurisdiction.
A free look period scenario
Let’s say Sarah, who is a computer engineer, went out with her friends for dinner. As they were dining, one of her friends mentioned their high school classmate who got sick and then died later on. And since that said classmate paid his insurance diligently while he is alive, he received money for the hospital. He also left some more money to his family after he died because he was eligible, and the insurance policy states this. Now, Sarah thought that life insurance is not a bad idea and decided to avail one from Leila, a friend she knew on social media right away.
Leila offered and presented to Sarah the life insurance with its policies, and she signed right away without being thorough about it. After two days, she reviewed the terms, and she realized that it was not the policy that she liked. She now decides that she doesn’t want to pay for this life insurance, so she called her friend to cancel. Leila now needs to grant this termination of contract since it has not been ten days yet, and it’s Sarah’s right to cancel as an insurance policyholder through free look periods. Later on, Leila sent a full refund for Sarah.