Is There a Cooling Off Period for Life Insurance?
Sometimes when you sign on the dotted line, you wish you could take it back. In the case of life insurance, that's often possible. In Canada, most insurers offer a 10-day period (and some 20) in which you can cancel your policy, no questions asked.
This "free look" offers valuable peace of mind, especially since some policies are complex and take some time to fully understand. When you're in the market for life insurance, it helps to know the range of options available to you.
Rescission Rights in Life Insurance
This is an industry guideline, not a rule, and it's important to note there is no legal compulsion to offer this term. Most Canadian insurers do offer this period for you to get to know the contract but it's always a good idea to double check your rescission rights with your agent before buying a policy.
When the Clock Starts Ticking
Ten days does not sound like a lot of time. So it's good to know when that starts. In general, it's from the time your policy was delivered. If you are getting paper documents, the 10-day period typically starts 5 days after they were mailed. If you get them via email, it's as soon as the email was sent.
During that period of time, you can contact your insurer or agent and tell them you wish to cancel the policy. They may ask you to give written notice of that desire to cancel.
Why You Might Have Second Thoughts
There are different types of life insurance. You could end up with a policy that isn't right for your needs, so the "free look" period gives you the chance to find the right coverage. For example, you might purchase term life insurance because it's more affordable, but decide permanent life insurance with a stable premium is more appropriate.
As with many contracts, the details are important. During the "free look" period, you might want to review those details with loved ones most affected by your decision.
Choosing the Right Life Insurance
Term, permanent and universal are different types of life insurance. Term insurance ends after a set number of years. Premiums are often less than with permanent insurance, but at the end of the term you usually have to buy a new policy at a higher rate. Premiums usually don't increase with permanent life insurance, although some contracts do come with adjustable rates. Universal life insurance is a form of permanent life insurance and may provide both an investment vehicle and a way to save on taxes.
Sound complicated? It can be. That's why it's essential to confirm that your insurer offers the "free look" period. Then, once you have your new policy, do your best to understand it completely. Don't be afraid to shop around if you think a competing insurer might offer coverage that works better for you.