Demystifying grace period and free-look period in health insurance
Ram and Shyam were two best friends, both had a problem with their respective health plans. Ram felt that his agent had cheated him into buying a health plan which had a higher premium (his research showed him plans with the similar benefits having lower premium rates). Shyam, on the other hand, had missed renewing his health plan on time (he was on a business trip). Both felt that they would suffer the consequences. Ram – by paying a higher premium. Shyam – by having his policy lapsed. Dejected and sad, they were looking for a possible solution when they stumbled across the concepts of Grace Period and Free-look Period. It was like manna from heaven!
Did you know that you can pay your premiums even after the due date has passed? That too without any additional charges or the fear of your policy lapsing! What if someone tells you that you can cancel your policy after buying it if you are not satisfied?
Your health insurance policy has various provisions to safeguard your, the policyholder’s, interests. Various clauses and terms are inherent in the insurance plan for the same. Two such concepts are:
- Grace Period
- Free-look Period
Do they sound the same? They are not. A grace period is completely different from a free-look period. Let us understand these concepts in details:
What is a Grace Period?
In every health insurance policy, there is a due date for paying the insurance premium. However, you might not be able to pay your premiums by the due date. Either because you forget or because you are in a financial crunch, you might miss paying the premium by the due date. In these situations, the policy allows a grace period for paying the premiums due. The grace period is essentially an extra tenure allowed by the company to enable you to pay the outstanding premiums. During the grace period the policy does not lapse. However, if you fall sick and raise a claim during the grace period, it would not be paid.
What is the tenure of the grace period?
The tenure of the grace period varies between different plans. Usually, it ranges from 15 days to 30 days.
What are the benefits of Grace Period?
A grace period has benefits which are as follows:
- The policy does not lapse during the grace period and you can retain the plan benefits.
- It helps in a cash crunch when you don’t have sufficient funds to pay the premium.
What is Free-look period?
A free-look period, also called a cooling-off period, is the time allowed within which you can opt out from the plan if you are not satisfied. The free-look period starts from the date of policy issuance and continues for 15 days. Within these 15 days, if you have second thoughts or feel dissatisfied with the policy, you can cancel the plan and avail the refund of your premium.
Click here to know why you should invest in a health plan.
What is the tenure of free-look period?
A period of 15 days is allowed as free-look period to cancel the plan. In case of distant marketing channels and in some plans, this period is increased to 30 days.
What happens when the policy is cancelled in the free-look period?
If you cancel the policy in the free-look period, the premium which you paid for buying the plan is refunded. However, the entire premium is not refunded as it is adjusted for the applicable charges incurred on issuing the policy. Such charges include stamp duty, cost of medical examinations conducted (if any) and the proportionate cost of risk cover allowed after issuance and before cancellation.
What is the difference between grace period and free-look period?
Both these concepts are technically different. Let’s see how:
So, now you know what grace period and free-look period are. Don’t confuse between the two. Know them and enjoy these benefits allowed by your health insurance plan.
Click here for common health insurance terms
Read more about How to choose an health insurance plan
Read also An anatomy of an health insurance plan
Feel free to leave your thoughts or comments below