How to Cancel Term Life Insurance Policy in Free Look Period?

It is important to purchase a term insurance policy to ensure the financial stability of the family in case of any unfortunate event. However, it is equally necessary to gain a detailed understanding of the policy that has been purchased and discontinue if it does not fulfil the requirements.For this purpose, every insurer is mandated by the Insurance Regulatory and Development Authority of India (IRDAI) to offer a free look period to cancel the policy with minimal loss on the refund amount. In the case of term insurance, this period is of 15 days after the policy documents are received. Also Read: What is Term Insurance? Once the papers have been comprehensively studied, and a discrepancy is found between the policy terms and insured’s needs, the policyholder must cancel term insurance policy within the free look period. The following important facts must be kept in mind:

1. Pro-rated risk premium
2. Any costs incurred by the insurer on the medical check-up
3. Stamp duty costs

1. Requisition to discontinue policy: The policyholder is required to fill in the requisition form for the cancellation of the policy once it has been established that it is not a suitable choice. While several insurers offer the option of online submission of the cancellation form, it is advisable to submit a hard copy of the duly filled form at the nearest office of the insurance company. The form contains all the necessary information like policy details, the reasons for discontinuing the policy, date of receiving the policy papers, and the insurance agent.
2. Endeavour to win back customer: After the receipt of the cancellation application, the policyholder is usually contacted by the insurer. The company tries to offer resolutions for all the problems due to which the policy is being cancelled. But, after all the efforts, if the policyholder still wants to cancel term insurance, the company has to proceed with the cancellation and refund procedure.
3. Refund Amount: Once the cancellation application has been completely processed, the refund amount is received by the policyholder either directly into the bank account or in the form of a cheque. However, the following deductions are made in the refund amount:

However, in the case of unit linked insurance policy (ULIP), the refund amount will be equivalent to the Net Asset Value (NAV) of the policy on the policy cancellation date. The above costs are deducted from the NAV. Also Read: All About ULIP - Unit Linked Insurance Plans

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.