Rhode Island Life Insurance Practice Exam

If Q returns a life insurance policy during the free-look period, what will the insurer do?

1. Charge a cancellation fee

2. Refund the premium fully

3. Offer a reduced benefit

4. Delay the refund for processing

The correct answer is: Refund the premium fully

During the free-look period of a life insurance policy, the insured has the right to review the policy and return it if they decide that it does not meet their needs or expectations. This period typically lasts for a specific number of days, often 10 to 30 days, depending on state regulations. If the policy is returned during this time, the insurer is obligated to refund the premium fully. This practice is designed to protect consumers and ensure that they have an opportunity to thoroughly evaluate the policy without financial penalty. The full refund includes the initial premium paid, allowing individuals to change their minds without losing money on the policy. The other options all suggest actions that would not align with the purpose or legal requirements of the free-look period. For instance, charging a cancellation fee or offering a reduced benefit would unjustly penalize the policyholder for using their right to evaluate the product. Similarly, delaying the refund would contradict the intent of giving consumers prompt access to their funds should they decide not to proceed.