The Cooling-Off Period
There is an obligation on insures and other financial services providers to clearly explain the characteristics of the products they are selling at application stage, there can still be issues which may remain unclear even after the contract is signed. That is why, in regard to some financial products, the consumer is allowed some time to go through his decision and given the opportunity to withdraw from the contract at no expense. This is referred to as the “cooling-off period”.
Without allowing the cooling-off period to lapse, you can withdraw from the contract without giving any reason for your decision. The right to withdraw is not applicable when, for example, you are purchasing term life insurance in order to obtain credit or loan facilities, you are not the life assured or the spouse or child of the life assured or when not purchasing the life insurance as an individual (as part of a group life policy, for instance).
If you allow the cooling-off period to lapse, even by a few days, you may not be entitled to receive refund of premium.
Contracts of insurance which are of a long term nature [over one year, for example], payment protection insurance as well as products purchased through distance selling (such as over the internet) where no face-to-face contact is made are subject to a right of withdrawal by the consumer.
The cooling-off period is NOT AUTOMATIC and does not apply to all financial products.
Normally, the cooling-off period starts running from the date the financial product is purchased. The consumer is given some days during which time, he or she may decide to reconsider the purchase and request a refund of any monies paid prior to the lapse of such cooling-off period without the imposition of any penalty or extra charges.
In every distance selling contract, a consumer is given a period of 14 calendar days to withdraw from the contract without incurring any penalty and without having to give reason. This right, however, does not apply to travel policies or similar short term insurance policies of less than one month’s duration. In regard to long-term policies, such as life and payment protection policies, this period is extended to 30 days irrespective of the method of purchase.
Usually, you would be entitled to receive a full refund of any premium or fees you may have already paid. In respect of unit-linked policies (such as retirement plans), you might not receive the full amount if, in the meantime, the value of the investments making up the policy decreased.
If any reward or benefits, such as any benefits paid under a life policy, are paid during the cooling off period, you would be required to pay it back. In addition, refund of premium will be given as long as no claims have been made in the meantime. You would need to return your insurance schedule or certificate to the insurance company together with your intention to cancel in writing.