Free look period

What is the free look period?

The free look period is a review window after purchase. A policyholder who reads the policy document and finds that it is not what they expected can return it to the insurer and get the premium back, subject to small deductions. In India the window is 30 days from the date the policy document is received, for life policies and new individual health policies with a term of one year or more. The insurer must accept the cancellation whatever the reason.

How the free look period works in India

The rule is in Regulation 20 of the IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024, which came into force on 1 April 2024, and is repeated in the Master Circular on Protection of Policyholders' Interests of 5 September 2024. Before 2024 the usual window was 15 days, so the change doubled the time a customer has to reconsider.

The insurer must tell the policyholder clearly about the free look option. The policy document's covering letter and the Customer Information Sheet both mention it. Refunds go only to the bank account of the policyholder or proposer, by electronic transfer.

General insurance. Motor, home, travel and other retail general policies do not have a free look period in the same form. Instead, the 2024 master circular allows a retail general policyholder to cancel at any time without giving reasons, with a proportionate refund for the unexpired period of a policy of up to a year where no claim was made.

Example. A customer pays ₹50,000 for a life policy, receives the e-policy on 2 March, and asks to cancel on 20 March. The insurer may keep the risk premium for the 18 days of cover, the ₹2,000 it spent on a medical test, and the stamp duty. If those come to ₹2,600, the refund is ₹47,400, due within 7 days of the request.

What the free look period means for distribution

A free look cancellation is the fastest feedback a distribution channel gets on how a policy was sold.

• Free look rate is a conduct metric. A high cancellation rate in a branch, partner or advisor usually means the customer did not understand the product, was sold the wrong one, or was pushed. Insurers and banks track it next to 13th month persistency and complaints.
• Commission is usually reversed. When a policy is cancelled in the free look period, the premium goes back and the commission paid on it is normally recovered under the insurer's commission policy. Incentive schemes that pay out before the window closes invite gaming.
• The 30 days start at delivery. For e-policies, the delivery timestamp matters. Make sure the customer's email and mobile are correct so the document actually reaches them, and do not hold back a physical copy.
• Use the window to confirm understanding. A short call after issue that walks through premium term, lock-in, charges and exclusions catches mismatches while the customer can still exit cheaply.
• Do not discourage cancellation. Telling a customer they "cannot cancel", or will lose most of the money, breaches the regulations and the fair treatment outcomes in the 2024 framework. If the customer wants out, help them file the request.
• ULIP refunds move with markets. Explain that a ULIP free look refund is based on the NAV on the date of cancellation, so it can be a little more or less than the premium.