Insurance Cooling Period :
There are different types of insurance policies meant to serve different purposes – car insurance, health insurance, home insurance, life insurance, etc. Insurance products come with rather long terms of use, clauses, and Riders. Since a layman is not expected to be well-versed with these concepts it is likely they may make an error while choosing an insurance plan. Keeping this in mind, insurers provide a window – usually, 15 – 30 days depending on the type of insurance plan opted – within which the purchaser may return the policy for whatever reasons. The purchaser is eligible to receive the premium paid, without any deductions, if the policy is returned during this period. Let us understand the concept of the cooling period in further detail.
Cooling period is designed to protect the interests of both the insured and the insurer. The insured is given the leeway to return the policy and is eligible to receive a full refund of the initial premium paid. While the insurer is not obliged to honor a claim within the first 30 days of commencement of a new insurance policy (barring a few exceptions). This ensures a policyholder does not misuse his insurance policy to avail undue benefits. Thus saving the insurer of significant losses. In the case of a health insurance policy, one cannot claim for expenses during the cooling period, except in the event of an accident.
Here are a few points to keep in mind:
a. The cooling period does not apply to policy renewal. Cooling period is applicable only for new insurance policies. If the insured renews their policy prior to completion of the policy term, then they are eligible for full benefits without a cooling window. Also, they cannot return/cancel their policy and claim refund of premium.
b. If the insured fails to renew their policy in time, then the renewal is considered a new issuance and therefore, the cooling period applies. However, it is important to keep in mind that while cooling period will become available, benefits such as No Claim Bonus accrued on the prior policy will be lost.
During the process of considering insurance policy purchase, it is important to compare documents to determine whether or not you made the right decision. Make sure you verify the following:
Is there a waiting period involved with your coverage? If yes, what is the duration?
What are the restrictions and exclusions involved?
Are there sub-limits applicable to the policy and what are those?
Does the insurer have coverage across a vast network of hospitals?
How many of the network hospitals are in the vicinity of your place of residence and how accessible are those at times of emergency?
Does the policy propose a co-pay? If yes, what percentage will be co-pay? What aspects of hospitalization cover will co-payment be applicable to?
What are the other clauses and riders in the scheme?
While the above is not an exhaustive checklist of things you should ask yourself, it definitely gives you a starting point.
Similar to Health Insurance, car insurance companies also offer a cooling period during which time one can feel free to cancel the policy should one realize the policy does not meet one’s requirements. As a customer, you have the leeway to cancel your policy in the event you are not satisfied with the offer, get a better deal from another insurer or for any other reason – but within the first 14 days of commencement of policy.
However, after the cooling period, the insurer will charge you depending on the number of months that have elapsed from the policy commencement date. While this varies from insurer to insurer, the charges are generally 10% within a month, 20% after two months and so forth. You are not eligible for a refund after eight months of commencement of your policy.
While insurers offer a cooling off period, it is important to thoroughly go through your policy document before settling for a plan. This will ensure you and your assets are adequately protected at all times.