Buying health insurance? Here's how the extended free-look period works

Th free look-in period is a valuable tool that empowers you to make informed decisions about your health insurance. Use it wisely to ensure you choose a plan that best protects you and your family.

Sonam, an IT professional, decided to buy a comprehensive health insurance policy for herself and her family. Given the rising medical costs, she felt it was of utmost importance. She did her research and consulted an advisor before she finalised the policy that not only covered hospitalisation expenses but also critical illnesses. Since she had diabetes, she chose a plan that covered pre-existing illnesses as well. She was happy with her decision until she received the policy documents. After carefully going through them, she realised that the waiting period for pre-existing conditions was longer than she anticipated. Moreover, she also found some exclusions that were not explicitly mentioned to her earlier. Since it had been only a few days since she had purchased the policy, she decided to cancel it and explore alternative options. Given that these days many insurance plans cover pre-existing illnesses from day 1, there were better alternatives available for her.

"The good news was that Sonam decided to cancel her policy during the free-look period, which made her eligible for a complete refund. The free-look period in insurance is a specified duration during which one can review the policy terms and make an informed decision about whether to stick with it. Currently, it is 15 days from the date of receipt of the policy document. However, the Insurance Regulatory and Development Authority of India (Irdai) has proposed to extend this free-look period to 30 days to give more time to consumers to make an informed choice," said Amit Chhabra, Chief Business Officer – Health Insurance, Policybazaar.com. 

How does this free-look period help you? 

When buying a health insurance plan in India, the free look-in period is a short window of opportunity given to you by law  to review the policy documents and assess if it meets your needs. It's essentially a trial period before the policy officially kicks in. Here's how it benefits you:

1. Think of it like a test drive for your health insurance. You get to examine the policy documents, understand the coverage details, exclusions, and limitations. 
2. Review Coverage: You can see exactly what medical expenses are covered by the plan, what hospitals are in the network (if applicable), and any limitations on room rent or doctor consultations.
3. Compare with Needs: Did you choose the right sum insured (maximum coverage amount)? Does the plan cover your specific health needs or pre-existing conditions?
4. Change Your Mind: If after reviewing the policy, you decide it's not the right fit, you can cancel it within the free look-in period and get a refund (minus some charges).

"The extended free-look period provides customers with more time to carefully evaluate their insurance policy; and to completely understand what exactly is covered and what is excluded. In this time, they can also seek clarifications from the insurer, and make an informed decision about whether to stick with the purchase...Typically, around one per cent of consumers use their right to free-look cancellation as it gives them better flexibility. An extended period translates to more people exercising their right to research more and get the policy that suits their needs," said Chabbra.

Here's how the free look-in period works:

1. The period typically lasts 15 days from the date you receive the policy documents. For electronic policies or those purchased online, it might be extended to 30 days.
2. To cancel, simply contact the insurance company within the free look-in period and inform them of your decision. You might need to submit a written request and the policy documents.
3. Refund: You'll get a refund of the premium you paid, minus any stamp duty charges and proportionate risk premium for the period you were covered (if any).

Important points to remember:

1. The free look-in period is for reviewing the policy, not for making claims.
2. Once the free look-in period is over, the policy becomes active, and cancellation usually becomes difficult.
3. Overall, the free look-in period is a valuable tool that empowers you to make informed decisions about your health insurance. Use it wisely to ensure you choose a plan that best protects you and your family.

"It often happens that many people end up buying insurance policies, especially towards the end of the financial year, to save taxes. In those moments, they often take everything told to them by agents at face value and finalise the decision. The focus, after all, at that time is how much money can be saved in taxes. However, it is no use to stick to a plan that is not completely suited to your needs just to save some money. A free-look period helps here even though the purchase is already made, and the premium paid. During this period, if the policyholders find out that the policy does not meet their expectations, they can choose to cancel it without incurring any penalties or financial losses," said Chhabra.