The Free Look Period is among the best kept secrets of the life insurance agents. What is it? In short, it is the time you have available to you to change your mind free of charge after your contract is delivered to you. In this article we’ll take a look at the background of this and why it is important for you to know your contract rights. It is essentially a safeguard against pressure sales. Historically, like pretty much all financial industries, the life insurance industry experienced a much fraudulent activity.
Steps in Getting a Life Insurance Contract
So, you decided you want to find out about life insurance and see if it’s the right thing for you. The best way to do that is to sit down with a knowledgeable and licensed agent or broker. Once you become familiarized with the basics and do some fact finding, you are ready to pick a product. You file a life app, possibly pay your first premium as a binder to receive a temporary insurance certificate. Next comes the underwriting process. Depending on the policy type, face value and your health, this can take a few weeks to a few months. Once this process is complete, your contract salesperson will come back to you with the final version of your life contract. You sign it and the contract is executed. Up until this point all steps taken were nonbinding and you could’ve changed your mind at any time.
Now that a binding contract is executed, your free look period starts.
Free Look Period
Your free look period is the time you have to study your final version of your life contract after it was executed. It is a period of 10 days, which allows you to withdraw from this contract free of charge. This means that if you find anything in the contract you don’t like and wish to withdraw, you will get a full refund of any money you paid up to date. The contract will be nullified and you will be free of any obligations.
Historical Issues at Hand
The life insurance industry received a bad rep especially back in the 1930s and 1940s, when it wasn’t regulated much and hence attracted many shady characters. There were also many companies springing up that collected premiums, but never paid benefits. The combination of these two was literally lethal. The problem with life insurance is that the policy is tailored to you. It is based on personal data, risk assessment and many other personal indicators. This is the reason why it’s impossible to present you with any type of a framework contract up front. To many specifics get modified in the underwriting process. Once this process is complete and you accept its final draft, the law now provides you with the free look period to review this information.
This helps to eliminate many of the pressure techniques, which are used by the shady salespeople. It discourages them because even if they collected your money, they are still not guaranteed to get paid. Historically, this wasn’t the case. Make sure you review the contract thoroughly and that it includes everything as promised and expected by you. It is also your last chance to review that it is the right type of policy for you.
Make sure you take advantage of it!