Have you ever purchased a product, decided after a few days that you didn’t like it, and promptly returned it? Most of us have – but did you know that you could essentially do the same thing with most life insurance policies?
Most insurance policies have a “free look period” that allows you to reconsider your policy and change your mind if you decide that it doesn’t really suit your needs. During that time, you can cancel your policy and receive a full refund or switch to a different one without policy surrender charges. Depending on the state, refunds are provided in the amount of purchase payment made or the account value at cancellation.
Generally, free look periods are ten days long, but they vary by type of policy, insurer, and by state. Insurers may choose to offer a longer free look period than those mandated by state insurance laws, but they can’t go below minimum requirements. Typically, longer free look periods are associated with replacement life or variable life insurance policies. For current free look period requirements, check with your insurer and your state insurance commissioner.
If you do decide to change your mind, your insurer will provide you with instructions on how to cancel the policy and claim your full refund. Details will vary by insurer, but normally you will either hand the policy over in person or mail it to the insurer/selling agent. You should receive your premium refund within thirty days of the notification date.
Many consumers simply accept the pitch of an insurance salesperson and never dive too deeply into the specifics of a policy. As a result, consumers do not always understand all of the rights, limitations, and obligations that apply to their insurance contract. The free look period gives you a chance to go over policy details on your own time, without the presence of an insurance representative who may make you feel pressured to accept.
Be patient as you review your policy, because insurance policies can be full of legal jargon that is difficult to decipher. Don’t hesitate to follow up with your insurance agent so he or she can explain using layman’s terms.
During the free look period, your policy is in full effect as long as you have made the necessary premium payment and have not already notified the insurance company to cancel the policy. In the rare case where an insured person dies during the free look period, coverage is still in place and the beneficiaries would receive full death benefits.
Use the free look period to go over your contract in detail. Granted, it’s not the most fun way to spend a day – or perhaps two, since life insurance contracts are often quite long – but it’s in your best interests to do a thorough contract review. If there are any elements that you don’t understand, contact your insurance agent to clarify any points of confusion.
Once you are fully satisfied with your policy and passed the free look period, don’t simply put your life insurance policy away in a lockbox, never to be seen again. Review your insurance policy periodically with your agent. Your insurance needs are likely to change over time, and your family is dependent on having sufficient insurance to handle the aftermath of an unexpected death.
Insurance companies offer a free look period for a good reason – to make sure that you have the right policy for your family’s needs. Use it wisely.
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