IRDAI Reg Section 20 : Free Look Period of Life and Health Policies

Explanation using Example

Example 1: Understanding the Free Look Period for a Life Insurance Policy

Introduction: John, a 35-year-old software engineer, recently purchased a life insurance policy from XYZ Insurance Company. He received the policy document electronically on March 1, 2024.

Application: According to Section 20, Sub-section (1) of the IRDAI Regulations, 2024, John has a free look period of 30 days from the date of receipt of the policy document to review the terms and conditions. This means John has until March 31, 2024, to decide whether he agrees with the policy terms.

Outcome: If John finds any terms disagreeable or decides that the policy does not meet his needs, he can return the policy for cancellation as per Sub-section (3). He must provide reasons for the return and ensure no claims have been made. The insurer, XYZ Insurance, is required to refund the premium paid, minus any deductions for risk premium, medical examination expenses, and stamp duty charges, as outlined in Sub-section (4).

Conclusion: By understanding and utilizing the free look period, John can ensure that he is fully satisfied with his insurance policy. Non-compliance with the free look period terms could result in John being locked into a policy that does not suit his needs.

Example 2: Exercising the Free Look Period for a Health Insurance Policy

Introduction: Sarah, a 28-year-old graphic designer, purchased a new individual health insurance policy from ABC Health Insurance. She received the policy document via mail on April 5, 2024.

Application: As per Section 20, Sub-section (1) of the IRDAI Regulations, 2024, Sarah has a 30-day free look period starting from April 5, 2024, to review the policy terms. During this period, ABC Health Insurance must inform her clearly about the availability of this free look period, as stated in Sub-section (2).

Outcome: On April 20, 2024, Sarah decides that the policy terms are not favorable and opts to cancel the policy. She submits a cancellation request, citing her reasons, and ensures no claims have been made. According to Sub-section (6), ABC Health Insurance must process her request and refund the premium within 7 days, deducting only the proportionate risk premium, medical examination expenses, and stamp duty charges as per Sub-section (4).

Conclusion: By exercising her rights under the free look period, Sarah can avoid being bound by a policy that does not meet her expectations. Failure to act within the free look period would mean she has to adhere to the policy terms until the next renewal.

Example 3: Free Look Period for a Linked Insurance Product

Introduction: Raj, a 40-year-old entrepreneur, buys a linked insurance product from DEF Insurance Company. He receives the policy document on May 10, 2024.

Application: Under Section 20, Sub-section (1) of the IRDAI Regulations, 2024, Raj has a 30-day free look period starting from May 10, 2024. If Raj decides to cancel the policy within this period, Sub-section (5) requires DEF Insurance to repurchase the units at the Net Asset Value (NAV) on the date of cancellation, in addition to the deductions mentioned in Sub-section (4).

Outcome: On May 25, 2024, Raj decides to cancel the policy due to dissatisfaction with the investment options. He submits a cancellation request, and DEF Insurance processes it within 7 days, as required by Sub-section (6). Raj receives a refund of the premium, adjusted for the NAV of the units and other deductions.

Conclusion: Raj's understanding of the free look period and its implications for linked insurance products allows him to make an informed decision without financial loss. Ignoring the free look period could have resulted in unwanted financial commitments.