Life License Qualification Program (LLQP) Practice Exam

What does a free-look period allow a policyholder to do?

1. Cancel the policy for a full refund

2. Make changes to the policy without penalty

3. Transfer to another insurer

4. Increase coverage amount

The correct answer is: Cancel the policy for a full refund

A free-look period is a designated timeframe during which a policyholder can reassess their decision to purchase an insurance policy after it has been issued. This provision is particularly important as it allows individuals to review the policy terms and conditions and ensures that they fully understand what they are committing to. During this period, the policyholder has the right to cancel the policy without facing any penalties, thus receiving a full refund of any premium payments made. This feature serves as a consumer protection measure, allowing the insured to back out of a contract they may feel is unsuitable for their needs right after the purchase, without incurring financial losses. While options involving making changes to the policy, transferring to another insurer, or increasing the coverage amount may seem beneficial, they do not accurately reflect the primary purpose of a free-look period. The focus is specifically on cancellation and refund, underscoring the importance of consumer rights in the insurance sector.