What is a Free Look Period for Life Insurance?

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Contributor, Benzinga
January 22, 2022

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Wondering if you need life insurance? Most people can benefit from it, and fortunately, there’s a way you can give it a try before committing to a policy long term. Here’s what you need to know about the free look period. 

What is a Free Look Period?

A free look period is a window of time during which the owner of a life insurance policy can terminate the policy without incurring penalties. The free look period is required, so you’ll have it no matter what insurer you go with. However, that doesn’t mean that every insurer offers the exact same free look period. 

The length of time that your free look period will depend on your life insurance company, but you can count on it lasting for at least 10 days. Each state sets its own requirements for how long the free look period must last, and some states can require as many as 30 days. Some insurers may offer a longer period of time than what’s required of them.

Some insurers have different start dates for the free look periods as well. For example, some life insurance companies start the free look period when you receive your policy paperwork, while others may start it on the day you actually begin receiving coverage from the policy. 

What to do During a Free Look Period

During the free look period, you should take the time to carefully review the terms and conditions of your policy. If there’s anything that you’re unsure about, this is the perfect time to talk to your insurer and ask questions. You’ll want to make sure you have a complete understanding of how your policy works and what might be excluded. 

The free look period can also give you a little bit of time to continue looking at other options. For example, when reviewing your policy documents, you might decide that the price for the amount of coverage doesn’t fit your budget. Or you might decide that you need more coverage than what you’ve purchased. The free look period gives you the opportunity to carefully consider these options again to make sure they are what you want and need. 

If you decide that you want to cancel your life insurance policy, you’re allowed to do so for any reason during the free look period. In most cases, you’ll have to call your insurer to cancel the policy. The benefit of canceling the policy during the free look period is that you’ll avoid paying surrender charges or other penalties. You’ll also receive a refund on all the initial premiums that you paid for the policy. 

There are a few reasons why you might decide to cancel your policy during the free look period. You might change your mind and decide that you don’t want a life insurance policy at this point in your life. Or you might have found a company or policy that offers different coverage that your current insurer can’t provide. In other cases, you might find out that your employer can offer you life insurance through its group plan for a much cheaper rate or at no cost to you.

But, of course, that doesn’t mean that you’ll definitely find a reason to cancel your life insurance policy during the free look period. If you’ve already done your research beforehand to find the best life insurance policy, you probably won’t have a reason to want to cancel your policy during the free look period. If you’re happy with your policy, you don’t have to do anything more during the free look period. Just remember to continue to pay your premiums on time to keep the policy in force.

The free look period isn’t your only chance to cancel your life insurance policy. You can still cancel your coverage later if you decide that you no longer want or need it. However, after the free look period, the insurance company won’t refund any premiums that you’ve already paid. The exception is if you’ve prepaid premiums for months that you haven’t used yet. For example, if you pay your premiums annually instead of monthly, you’ll be refunded for the months that you won’t have your life insurance coverage.

Compare Life Insurance

Purchasing a life insurance policy is a big decision that can affect your life as well as the lives of your loved ones and other beneficiaries. It’s important to carefully consider your options before choosing a policy. Benzinga offers insights on life insurance and reviews of insurance providers to help you make an informed decision.

How to Cancel Life Insurance

The best way to cancel your life insurance policy depends on a few factors. If you’re still within the free look period, you’ll most likely need to call your insurer to cancel the policy and get your refund. If you’re beyond the free look period, canceling the policy can be a bit more complex.

The simplest way to cancel your policy is to discontinue making your premium payments. When you go into nonpayment, your insurance policy will no longer be in force. You could also send a written notice to your insurer to let them know that you would like to cancel your policy. This procedure works best with term life insurance policies. If you cancel a term life insurance policy, you incur no fees or penalties, even after the free look period has ended. 

However, if you have a whole life insurance policy, you have more factors to consider. Whole life insurance has a cash-value account and with that comes a cash surrender value. When you cancel (otherwise known as surrendering) your policy, you can cash out the cash surrender value of the policy, which is the cash value of the account minus any fees and penalties your policy may be subject to. Your interest earnings will also be taxed as income if you cash out the policy. In some cases, if you stop making payments, your insurer may automatically cash out your whole life insurance policy. 

If you have another type of permanent life insurance, canceling your policy isn’t as easy as discontinuing your premium payments. With universal life insurance and some other permanent life insurance policies, the insurer will automatically use your cash value to fund your premiums if you stop making payments. Not only would this keep your policy active, but it would also reduce the amount that you would receive when you cash out your policy. This process would continue to happen until the cash value is completely empty, at which point the policy would be canceled. In these cases, you would be charged surrender fees and taxes.

You have other options to consider if you want to cancel your policy because you’re struggling to make your premium payments. If you run into financial problems, you can call your insurer to see if there are any alternative options. Some insurers may offer a reduced paid-up option which will allow you to stop paying your premiums. In this case, you would receive a lower death benefit in exchange for discontinuing your payments. The lower death benefit amount would be based on the premiums that you’ve already paid. 

Do I Need Life Insurance?

Life insurance can benefit most people. If you have a spouse or dependents who depend on your income, or if you have debts that would be left to others when you pass away, it’s important to have a plan to protect your family’s future. Benzinga is here to help you stay up-to-date on the latest features and reviews so you can make the best financial decisions for yourself and your family. 

Frequently Asked Questions

Q

What is the free look period for my state?

A

The free look period in every state is at least 10 days. Your insurer can tell you how long your free look period will last based on state requirements as well as the insurer’s free look period offer.

Methodology

Benzinga crafted a specific methodology to rank life insurance. To see a comprehensive breakdown of our methodology, please visit our Life Insurance Methodology page.

About Ashley Hart

Ashley Hart is a personal finance writer passionate about helping people feel empowered to take control of their finances. She has more than eight years of writing experience, focused on insurance.