Minnesota Life Insurance License Practice Exam

What happens if a person cancels an insurance contract within the free-look period?

1. No refund is given

2. Full refund of premium paid, excluding fees

3. Partial refund based on usage

4. Refund minus processing fees

The correct answer is: Full refund of premium paid, excluding fees

When a person cancels an insurance contract within the free-look period, they are entitled to a full refund of the premium paid. The free-look period is a consumer protection feature included in many insurance policies, which allows the policyholder a certain amount of time—usually 10 to 30 days—to review the policy terms and conditions and decide if they still wish to keep it. During this time, if the policyholder chooses to cancel, they can do so without penalty and will receive a complete refund of the premiums they have paid, excluding any additional fees that may have been initially charged, such as administrative fees or policy fees that are not typically refundable. This provision is designed to safeguard consumers, giving them the opportunity to reassess their decision after purchasing insurance, as well as to encourage informed decision-making. In most cases, insurance companies must adhere to this practice, further emphasizing the importance of consumer rights in the insurance industry.