Arizona Life and Health Practice Exam

Which life insurance provision allows a policyowner to cancel the policy and receive a full refund within a limited time period after delivery?

1. Waiver of premium provision

2. Free-look period

3. Grace period

4. Contestability period

The correct answer is: Free-look period

The provision that allows a policyowner to cancel the policy and receive a full refund within a limited time after delivery is known as the free-look period. This feature is designed to provide policyowners with an opportunity to review their insurance policy and ensure it meets their needs without the risk of financial loss if they decide to cancel. During the free-look period, usually lasting anywhere from 10 to 30 days depending on the insurer and state regulations, policyowners can scrutinize the terms, coverage, and costs. If they are not satisfied for any reason, they can return the policy and receive a full refund of any premiums paid. This type of provision is crucial in the insurance industry as it fosters consumer protection and assurance. It allows individuals to make informed decisions about their life insurance coverage, enhancing their confidence in their purchase. Thus, if a policyowner feels that the policy does not align with their initial expectations or needs after receiving it, they can exercise their right to cancel during the free-look period without any financial penalties.