Glossary
Free look period, defined
A window after a new policy is delivered during which the owner can return it for a full refund with no questions asked. It exists so a buyer can read the actual contract, not just the illustration, before committing.
In practice
The window runs from the delivery date, not the application date, and its length is set by each state; a replacement policy or a policy sold to an older buyer often gets a longer one. Use it: compare the issued policy against the quote for rating class, riders, face amount and premium, since the underwriter may have issued it on different terms than applied for. Returning a policy inside the window is a simple written request to the carrier or the agent. For annuities the refund normally includes the full premium, though a variable contract may return the current account value instead. Do not cancel an old policy that is being replaced until the new one is in hand and the window has closed.
A worked example
Suppose a buyer applies for a $500,000 twenty-year term policy at a preferred rate and the carrier issues it at a standard rate with a premium of $70 a month instead of $45. She reads the delivered policy, decides to shop the standard rating elsewhere, and returns it within the window for a refund of the first payment. Hypothetical figures.
Applies to: Life InsuranceAnnuities