Free-Look Period Extended to 30 Days: IRDAI 2024 Directive, Refund Computation, and the Proposal-vs-Policy Distinction

If a relative bought a Rs 5 lakh single-premium ULIP from a bank branch on 30 April 2026, the agent likely told them the policy is "locked in for five years." That is true after the free-look window closes. Before it closes, the policyholder can walk away with a near-full refund, and after 20 March 2024 the window is wider than most agents are willing to admit. The IRDAI (Protection of Policyholders Interests, Operations and Allied Matters of Insurers) Regulations, 2024, notified on 20 March 2024, extended the free-look period to 30 days for every policy, online or offline, life or health or general. Earlier regulations gave only 15 days for in-person sales, which is where most mis-selling happens.

This article walks through what the 30-day free-look window now covers, how the refund is computed for unit-linked and non-unit-linked products, the seven-day refund deadline insurers must meet, and the procedural traps that still cause genuine cancellation requests to be rejected.

The Rule / Product

Regulation 4 of the IRDAI (Protection of Policyholders Interests, Operations and Allied Matters of Insurers) Regulations, 2024 prescribes the free-look entitlement. The text was notified in the Gazette of India on 20 March 2024 and replaces the 2017 Protection of Policyholders' Interests Regulations on this point. The provision applies to all individual life insurance policies, all individual health insurance policies, and all retail general insurance policies of one year or more. Group policies and single-premium covers of less than 12 months are excluded.

The 30-day clock starts from the date of receipt of the policy document by the policyholder, not the date of proposal, not the date of premium debit, and not the date the policy is generated in the insurer's system. Receipt is evidenced by courier delivery proof, e-mail logs (for electronic policy bonds) or a signed acknowledgement at the branch. The 2024 Regulations explicitly recognise electronic delivery; if the policy is sent only to an e-Insurance Account (e-IA) under the IRDAI Repositories Regulations 2015, the date of credit to the e-IA counts as the date of receipt.

To exercise the free-look right, the policyholder must submit a written request to the insurer within the 30-day window, stating reasons for disagreement with the policy terms. Reasons can be as ordinary as "the rider explained at the time of sale is not in the bond" or "the premium-paying term is longer than I was told." Insurers cannot demand a notarised affidavit or a specific format. The 2024 rules at Regulation 4(2) require the insurer to refund the money within seven days of receipt of the cancellation request, down from 15 days under the 2017 regulations.

The refund itself is not a full refund of premium. It is reduced by the cost of risk cover already provided, stamp duty paid to the state government, and, for health policies, the medical examination cost the insurer incurred. For ULIPs the rule is different because the policyholder bore the market risk during the days the units were allotted: the refund is the fund value on the cancellation date plus all charges deducted (mortality, allocation, policy administration, fund management).

Why It Matters

Mis-selling complaints continue to dominate the insurance ombudsman dockets. The Council for Insurance Ombudsmen Annual Report 2022-23 (published on irdai.gov.in) recorded 40,527 complaints disposed of, of which roughly two-thirds related to life insurance and a significant share to sales-stage disputes such as mis-described product features, hidden charges, and pressure-selling to senior citizens. A wider 30-day window directly affects these consumers because it gives them more time to read the policy bond, consult family members, and seek a second opinion before the option to walk away lapses.

For ULIPs and traditional endowment products, the financial stakes are substantial. A 30-year-old buying a 15-pay endowment policy at an annual premium of Rs 1 lakh commits to Rs 15 lakh in nominal outflow. The Rs 25,000 to Rs 35,000 loss that typically results from surrendering such a policy in year two or year three (after lock-in but before paid-up status) is the most common counter-factual to using the free-look window. Reading the bond carefully in days 1 to 30 is the only zero-cost exit available.

For health insurance, the 30-day window is just long enough for a senior citizen to compare the proposal with policies bought earlier under the health insurance portability rules and decide whether the new contract preserves their accumulated waiting-period credit. The portability rules and the free-look rules sit together in the 2024 Protection of Policyholders Regulations; using one without checking the other is what causes the cleanest cancellations to fall apart in practice.

The third reason this rule matters is jurisdiction. A free-look cancellation that is wrongly rejected by an insurer can be escalated to the Insurance Ombudsman under the Insurance Ombudsman Rules, 2017, provided the disputed amount is under Rs 50 lakh and the complaint is filed within one year of the insurer's final response. The Ombudsman can order full refund with interest at the bank rate plus 2 per cent. Without the free-look right, the only remedy is surrender, which is contractual and not appealable.

Worked Numbers

Take two contrasting refund computations: a traditional endowment policy and a unit-linked plan, both bought on the same day.

Case A — Traditional non-participating endowment. Suresh, age 45, buys a 20-year endowment policy from a private life insurer on 1 April 2026 with an annual premium of Rs 60,000 and a sum assured of Rs 12,00,000. He receives the policy document on 10 April 2026 by courier. On 25 April 2026 (day 15 of his free-look window) he requests cancellation in writing. The insurer must compute the refund as follows under Regulation 4(3) of the 2024 Regulations.

Suresh loses about Rs 1,858 (3.1 per cent of premium) for the 15 days of cover he enjoyed. This is the cost of having a genuine option to test the policy.

Case B — Unit-linked insurance plan. Priya, age 35, buys a regular-premium ULIP on 1 April 2026 with an annual premium of Rs 1,00,000 and a sum assured of Rs 10,00,000. She receives the e-policy in her e-IA on 5 April 2026. NAV on 1 April was Rs 24.50; she paid Rs 6,000 in premium allocation charge, Rs 250 in policy administration charge, and Rs 600 mortality charge. Units allotted: (1,00,000 - 6,000) / 24.50 = 3,836.73 units. On 28 April 2026 (day 24 of her free-look window) she requests cancellation. NAV on 28 April has fallen to Rs 23.10.

Priya recovers Rs 95,278 against the Rs 1,00,000 she paid. The Rs 4,722 shortfall is entirely the market loss from the NAV fall (Rs 24.50 to Rs 23.10), not an insurer-imposed cost. If markets had risen, she would have received more than Rs 1,00,000. This is why ULIP free-look refunds are described as "NAV-linked" rather than "premium-minus-charges."

Use the ULIP vs mutual fund calculator to compare net-of-charges returns before committing to a ULIP in the first place; the free-look right is a fallback, not a substitute for a careful product choice. For traditional life policies, the term insurance premium calculator shows the pure protection cost so you can judge whether the endowment loading is worth paying.

Pitfalls

The 2024 Regulations are policyholder-friendly on paper. In practice, six recurring traps still cause genuine cancellation requests to be rejected or delayed.

1. Counting days from the wrong starting point. The 30 days run from receipt, not from proposal signing. Bank branches sometimes record receipt on day 1 and hand over the bond on day 12, leaving only 18 effective days. Keep the courier slip or e-IA credit notification as proof of actual receipt date. Where the insurer's record differs from the policyholder's, the Insurance Ombudsman has consistently ruled in favour of the later date in Awards cited on the Council for Insurance Ombudsmen portal.

2. Submitting the cancellation by e-mail without acknowledgement. Regulation 4(2) accepts written requests in any form, including e-mail. But insurers sometimes claim the e-mail was not received. Send to the registered grievance e-mail listed on the insurer's website and follow up with a registered post acknowledgement to the corporate office address. The Indian Evidence Act, 1872, Section 65B accepts e-mail logs as evidence with an ISP certificate, but a postal trail is simpler.

3. Health insurance with claim already filed. If a claim has been intimated during the free-look window, most insurers will refuse cancellation on the ground that risk has crystallised. Regulation 4(4) does not explicitly bar this, but in practice the refund will be netted against the claim amount, often resulting in no payout either way. Plan the free-look exit before submitting any claim.

4. Single-premium short-term policies. Travel insurance covering a 14-day trip, marine cargo covers, and event insurance for under one year have no free-look right. The 2024 Regulations exclude these because the risk period is so short that 30 days would cover the entire trip. The travel insurance calculator flags these covers as non-cancellable.

5. Group policies. Master policies issued to employers, banks (for credit-linked covers), or co-operative societies are governed by the master contract; individual members have no independent free-look right. This catches borrowers sold credit life cover bundled with personal loans, where the loan agreement assigns the policy to the lender on day 1.

6. ULIPs cancelled in a falling market. Even if everything else is done correctly, the NAV-linked refund formula transfers downside risk to the policyholder for the days the units were held. There is no recourse against the insurer for the NAV component; the only fix is to read the bond and decide quickly when the policy is first delivered.

The checkpoints to apply on every free-look decision are summarised below.

The mis-selling protection is meaningful only if all five rows are observed. Skip any one and the policyholder is left arguing in equity rather than in regulation.

FAQ

Does the 30-day free-look period apply to policies bought before 20 March 2024?

No. The 2024 Regulations apply to policies issued on or after 20 March 2024. Policies issued earlier are governed by the 2017 regulations, which provided 15 days for offline policies and 30 days for distance/electronic mode. The cut-off is the date of policy issuance, not the date of premium payment.

Can I exercise free-look for a policy bought through a bancassurance channel?

Yes. The 2024 Regulations apply to every distribution channel, including bancassurance, individual agents, brokers, web aggregators, and direct sales. Regulation 4(1) makes no distinction between channels. Bank branches sometimes resist because the upfront commission is clawed back, but the right is unaffected.

What happens if the insurer takes more than 7 days to refund?

Regulation 4(2) of the 2024 Regulations requires refund within seven days of receipt of the cancellation request. Beyond that, interest is payable at bank rate plus 2 per cent. The policyholder can also file a complaint with the Insurance Ombudsman under Rule 13 of the Insurance Ombudsman Rules, 2017, for disputed amounts up to Rs 50 lakh.

Can the insurer impose a cancellation charge?

No. The 2024 Regulations explicitly prohibit cancellation charges, processing fees, or any deduction other than the four heads listed (pro-rata risk premium, stamp duty, medical examination cost, and for ULIPs the NAV-linked fund value). Any "policy issuance fee" claimed against the refund is non-compliant and should be challenged through the Grievance Redressal Officer.

Is the free-look right available for online policies bought through web aggregators?

Yes, and it is now 30 days, the same as offline. Earlier, electronic mode already enjoyed 30 days under the 2017 regulations, so for online policies the 2024 change is essentially a continuation. The clock starts from the date the policy bond is delivered to the registered e-mail or e-IA.

What is the difference between free-look cancellation and policy surrender?

Free-look cancellation is exercised within 30 days of receipt of the policy and gives back almost the full premium less a small risk-cover deduction. Policy surrender is exercised after that window, is governed by the surrender value table in the bond, and typically returns 30 to 50 per cent of premiums paid in the early years for traditional policies. The two are entirely different rights, and free-look is by far the more valuable. The health insurance premium calculator helps test whether a policy is worth keeping before the window expires.