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.
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.
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.
Good Info! Thanks for sharing.
Much appreciated Jack – have a great weekend!
This is a great for read for individuals looking into purchasing life insurance. It is important that the policy holder is aware of the free look period in order to gain a little more comfort in their purchase.
Thanks Michael. I agree thanks for sharing you insights.