Once upon a time—and not that long ago, either—the U.S. life insurance industry was very weakly regulated. The results were what you would probably would expect: shady insurance agent using high-pressure tactics, badgering customers into buying high-priced policies from
disreputable (or nonexistent) companies that would never pay a claim.
Things have become a lot better since then. The negative public opinion from unethical insurance salesmanship in the 1930s and 1940s forced the industry to reform its practices. State governments got involved, too, in response to citizen complaints about abusive sales strategies.
And that’s how the “free look period” was born.
Nowadays, when you buy life insurance, you typically will be asked to give a check for your first premium when you turn in your application. That sets the clock ticking. For then next week—or ten days, or 14 days, or as long as 30 days in some cases—you have a chance to reconsider your purchase. You have the opportunity to talk about your life insurance investment with friends and family members, away from the pressure of the agent’s office.
Perhaps you change your mind. If you decide that the aggressive sales tactics of the insurance agent influenced you too much, you have a recourse: you can cancel your policy. Depending on the rules that prevail in your state, you can rescind your purchase with a phone call, a registered letter, or a visit to your agent’s office. Your premium payment will be mailed back to you a few days later.
This cancels the insurance contract. You owe nothing and have no obligation in the future.
Many states have passed laws requiring the life insurance free examination period last for a specific number of days for all policies written in the state. The life insurance free look period has been so critical to building trust that reputable life insurance companies will usually offer customers a cancellation period even when state laws do not require it. There are four important rules that will always apply here:
- State laws often make a distinction between consumers who buy life insurance through the mail or online, and those who enroll in the physical presence of an agent. Consumers who buy mail-order life insurance are frequently given a longer free look period, such as 30 days.
- The free look period your life insurance company offers will be at least as long as state laws require. The policy should include language specifying the length of the free examination period, and it should give instructions for canceling within the free look period.
- All buyers must be given equal treatment. If the company offers a ten-day free examination period to one buyer, it must make the same offer to all customers.
What about life insurance claims during the free look period?
From the instant the client pays her initial life insurance premium, a contract is created. She is completely protected under the terms of her life insurance policy. The legal right to rescind the life insurance policy during the free look period is one-sided: only the customer may do so.
This means that if the policyholder dies during the free look period, the insurance company is obligated to pay the beneficiary. Often, when this happens, the company will take the time to review the policyholder’s application to see if there are other grounds to contest the policy. Insurance companies make money by collecting premiums, not by paying out benefits. They are especially likely to deny paying life insurance benefits when the ink on the policy is barely dry.
Is the life insurance company treating you fairly?
The free look period protects the consumer against the predatory sales techniques that used to be common in the life insurance industry. Today, it is rare for a beneficiary to have a delayed or denied life insurance settlement because a death occurred during the free look period.
But if a life insurer is giving you the runaround instead of paying the claim you deserve, you may need extra leverage. Our attorneys at Life Insurance Law work with clients across the United States to finalize settlements when life insurance companies are stalling. If the company
refuses to meet the demand for a payment, we’re not timid: we’re drag company officials into the courtroom and make them justify their actions to a judge.
We’re here to get you the benefits you deserve—and best of all, you pay nothing until we get you a recovery. Any questions? Call us today at (215) 531-7961 for a free and confidential consultation.