A life insurance free look period allows policyholders to cancel coverage early on without triggering penalties. Though most life insurance policies allow such leniency, many employer-sponsored group plans with collective benefits and independent coverage grace periods do not have to provide customers with a free trial. Likewise, credit life insurance companies rarely offer free look periods.
During these windows, also known as examination periods, policyholders can ask insurance agents to explain their coverage details thoroughly. Policyholders can also use this time to have lawyers and financial advisors review their contracts and ensure they choose a plan that suits their needs and budget.
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When Does the Free Look Period Start?
Free look start dates vary from one insurer to another. Some insurance companies begin the free look period on the first day of active coverage, while others activate it upon submission of your enrollment documents or your first premium payment. Ask your insurance agent for your free look period’s specific start and end dates to maximize its potential and get a better feel for your tentative life insurance policy.
How Long Does the Free Look Period Last?
Free look periods typically last 10 to 30 days, depending on your insurer and state. While all 50 states impose a 10-day minimum, insurance companies can choose to follow state recommendations or extend their free look period beyond 30 days or more.
When purchasing life insurance, utilize your free look period to assess whether a policy meets your needs and budget. Hire an attorney, accountant, or independent insurance expert to review your contract and highlight tentative red flags. Likewise, directly present questions to your insurer, as they are legally obligated to provide honest information about your coverage, premium details, and potential fees lurking in the fine print.
How to Determine Whether To Keep or Cancel Your New Policy
Whether to keep or cancel coverage during a free look period for life insurance ultimately depends on your preferences. Thoroughly analyze your insurance contract against your unique financial needs and lifestyle requirements. If you find better-suited coverage somewhere else or change your mind about life insurance altogether, you must cancel your policy before the free look period closes to ensure a total refund.
Given that life insurance often requires a long-term or permanent commitment, free look periods allow policyholders extra time to ensure they feel satisfied with their purchase. If you live out your free look period and discover your coverage meets your needs at an affordable price, simply continue paying your monthly premiums to sustain your policy.
How to Cancel Your Policy During the Free Look Period
If you want to cancel your life insurance policy, you can easily do so at any time; however, dropping coverage during the free look period is the only way to ensure you receive a full refund and avoid cancellation penalties. Most insurance companies require a cancellation notice by phone or in person before the expiration of the timeline specified in your life insurance contract.
Insurance agents can also provide details about how to properly cancel a life insurance policy during its free look period, including the final possible termination date, additional required documents, and whether alternative life insurance plans are available. Policyholders can also confirm their total refund amount and the estimated refund processing time when they call to cancel benefits.
Can You Cancel Your Policy After the Free Look Period?
While you can always cancel your life insurance policy after your free look period has ended, depending on the policy type, you may owe surrender costs for doing so. However, you can cancel a term policy at any time without penalty. Likewise, you will lose out on all previously invested premium payments. Insurance companies typically only make exceptions for prepaid policies. In these cases, you would receive a refund for months you paid in advance but had yet to utilize.
Cancellation rules and guidelines will also vary depending on your insurance company and type of life insurance plan. For example, some insurance companies offer partial refunds if a policy gets terminated in the middle of a billing cycle. Or, considering their significant cost and coverage differences, policyholders tend to lose less money after canceling a term life insurance policy than surrendering their whole life coverage.
The only guaranteed means of ensuring a full refund of premium payments is to cancel during the free look period. Canceling a policy after the free look period can also trigger a lapse in coverage, significantly impacting a policyholder’s eligibility for future life insurance benefits.
How to Cancel a Policy After the Free Look Period
Whether or not you decide to cancel your life insurance policy during your free look period or after it expires, you must ultimately follow an identical process. Contact your life insurance agent and make them aware of your intentions. Conversely, if you have term life insurance, you can simply stop paying your premiums to trigger the automatic termination of your coverage.
Whole life insurance policyholders must always contact their insurance agent to make significant coverage changes or deactivate their plans. Generally, canceling a policy after the free look period means policyholders forfeit their right to a premium refund and often must pay surrender charges and additional early termination fees for breaking their contract.
Considerations Before Changing Life Insurance Policies
Numerous personal, coverage-related, and financial factors can lead policyholders to update or cancel their life insurance contracts, including the inability to keep up on premiums, indecision on a death benefit amount, family affairs, and lifestyle changes. Regardless of your reasons, always consider the financial impact of canceling a life insurance policy, as breaking your contract can lead to tax consequences, surrender charges, and additional fees.
Notably, some insurance companies require policyholders to undergo repeat medical underwriting before switching policies, including a medical questionnaire and physical examination to determine their coverage eligibility. This can occasionally prove costly for those whose health has declined since passing the initial medical review on their previous policy.
Furthermore, new insurers sometimes impose “waiting periods” to contest or deny a policyholder’s death benefit during the first two years of coverage, inhibiting their ability to switch plans. To avoid all the potential drawbacks of canceling a life insurance policy, consider switching from one policy type to another under your current insurer. Doing so could help you secure more favorable and affordable benefits without undergoing medical underwriting, surrender fees, or subsequent waiting periods.