Reviewed by Aug 27, 2020| Updated on
The good thing about insurance policies is that the insured is not obliged to the insurance company, for better or worse of life. If he wishes to cancel an insurance policy, he may do so. It could be that such a person may find a better deal somewhere if he doesn’t like his current insurer’s customer service. The dislike could be on account of the policy due for renewal, and another insurance provider has attractive terms.
In general, the only matter the insured needs for cancellation is to send the insurance broker or insurer a written notice. The problem is that he has already paid out his premiums in advance and may also seek a refund of the same.
All about Refund under Insurance
Most insurance companies typically will refund the unused portion of the money that the insured paid when he cancelled insurance policy. Only home insurance is subject to proration while car insurance is short. That means it’s not a smart idea to cancel a car insurance policy mid-term! Yet, the insured is going to get some money back for the services that were not rendered.
A refund may be received based on the cancellation timing. All cancellations are based on the annual premium and will be charged on risk time (the time one was insured).
What happens if he used a pre-authorised payment option instead of paying upfront, month by month? In this scenario, all payments will be halted, and the account will no longer be auto-debited by the insurance provider. The cancellation shall take effect on the date that he made his written submission.
The cancellation request needs time for the insurance company. If the application is submitted very close to the next monthly payment, it may not be processed in time to stop the account from debiting the next month. One has to be prepared for a surcharge just in case. If policyholder made a payment after the cancellation date, he would receive a refund after it is processed.
The law allows the policyholder to have 15 days as the free-look period from the date the policy document is received. During this duration, the policyholder is entitled to cancel the policy and get a refund.
Refund in case of ULIP
In the case of a refund of a ULIP policy, the refund premium will be applicable as per the ULIP’s prevailing NAV on the date of policy cancellation (after deduction of the above fees). It is because the policy is linked to the market. It is the policyholder’s responsibility to prove the date on which the policy document is received. The free-look period of 15 days is pushed to 30 days if the policy is sold online.