Free Look Period
Insurance is a contract in which an individual or entity receives financial protection or reimbursement from an insurance company. Insurance policies are used to protect against financial losses that may result from damage to the insured or his property or liability for damage or damage caused to others (OECD, 1999, p. 41).
Common elements of insurance policies:
- free look period;
- death benefit (a payout to the beneficiary, if the owner of the contract dies, it's not subject to income tax, usually in the form of a lump sum payment);
- guarantees (K. Pechter, 2011, p. 31).
Free Look Period
Free look period - the period during which you should evaluate your health insurance or other insurance policy and you could return it to your insurer for a full refund, without penalties (such as surrender charges).
This is the period (often lasts 10 or more days - depending on the insurer) during which the new policyholder can check the individual health policy, life insurance or invalidity insurance and exchange it for a full refund if he is not satisfied in any way. Free look period provides additional time to familiarize yourself with the new insurance policy thoroughly and to contact your agent, lawyer or representative of a given company.
The cancellation of insurance is valid from the date of issue (D. Marcinko, MBA, CFP, CMP, 2006, p. 125).
The duration of the free look period varies depending on the type of policy. For example, the free look period in case of health insurance is usually 10 days, and the free look period for property and liability insurance is often 30 days (L. Silver, R. Stevens, K. Clow, 2010, p. 67).
This encourages owners to review their contracts, and if they change their mind, gives them the option to cancel the contract. After canceling during the free look period, the insurance company must return all premiums paid. However, if cancellation occurs after the end of the free look period, the owner usually receives only the redemption value of the contract. In the first years, this redemption value will probably be much lower than the amount of premium paid (D. Marcinko, 2005, p. 30).
| Free Look Period — recommended articles |
| Mortgage redemption insurance — Insurance — Indemnity bond — Aggregate Limit — Waiver of premium rider — Educational fund — Collateral assignment — Guaranteed renewable — Depository bond |
References
- Chandnani L. (2017), General Insurance, Reinsurance and Risk Management Glossary, Notion Press, Chennai
- Marcinko D. (2005), Insurance and Risk Management Strategies for Physicians and Advisors, Jones & Bartlett Learning, Sudbury
- Marcinko D., MBA, CFP, CMP (2006), Dictionary of Health Insurance and Managed Care, Springer Publishing Company, New York
- OECD (1999), Glossary of Insurance Policy Terms, OECD Publishing, Paris
- Pechter K. (2011), Annuities For Dummies, John Wiley & Sons, Hoboken
- Silver L., Stevens R., Clow K. (2010), Concise Encyclopedia of Insurance, Routledge, New York
Author: Katarzyna Sieczkowska
