Cancellation, Free-look & Cooling-off Periods *(Part I)*
Concept
Cancellation, free-look and cooling-off periods are post-sale *"change your mind"* windows that let a retail client walk away with a refund shortly after buying. The name and the mechanics differ by product type — "free-look" for insurance, "cancellation period" for investments/CIS, and terms-based "cooling-off" for some structured products. The exam tests the exact number of days, the trigger event (when the clock starts), and what is actually refunded (full premium vs market value).
Key rules & facts
- Life & health policies — free-look: minimum 14 days from receipt of the policy document (many insurers grant 21 days). Applies to life/health policies, not short-term general insurance like travel/motor (verify current MAS/insurer practice).
- Refund (non-ILP life/health): premiums paid less any medical/underwriting costs and admin expenses already incurred — so not always 100% of premium.
- ILP (Investment-Linked Policy) free-look: the refund is adjusted for the market value of the units — if the underlying funds have fallen, the client may receive less than premiums paid (MAS Notice 307). (verify: exact refund formula.)
- CIS / unit trusts — cancellation: 7 calendar days from signing the purchase agreement (SFA 04/13-N01). Units are returned and sales charges refunded, but the investor bears any market fall over the period.
- Structured products / SIPs: cooling-off is generally delivered through product terms plus FAA-N16 CKA/CAR safeguards rather than a single fixed statutory free-look period. (verify.)
Key data — cooling-off by product
| Product | Window name | Duration (verify current) | Clock starts | What's refunded |
|---|---|---|---|---|
| Life / health policy (non-ILP) | Free-look | min 14 days (often 21) | Receipt of policy document | Premiums less medical + admin costs |
| Investment-Linked Policy (ILP) | Free-look | min 14 days (often 21) | Receipt of policy document | Market value of units (may be < premiums) — Notice 307 |
| CIS / unit trust | Cancellation | 7 calendar days | Signing purchase agreement | Sales charges refunded; investor bears market fall — SFA 04/13-N01 |
| Structured product / SIP | Cooling-off (terms-based) | Per product terms (verify) | Per contract | Per terms + FAA-N16 CKA/CAR |
| Travel / motor (general) | None (typically) | — | — | — |
Exam angle
Situational and numeric — e.g. *"client bought an ILP, cancels on day 10, the fund has fallen 8% — what's refunded?"* Answer: the market value of the units at cancellation, not the full premium. Or *"is a 3-day-old unit-trust purchase still cancellable?"* Yes — within the 7-day window.
⚠ The trap
Assuming a free-look always returns all premiums — for ILPs and CIS the client bears investment losses, and even non-ILP refunds deduct medical/admin costs. Second trap: mixing up 14 days (insurance free-look) with 7 days (CIS cancellation).
Worked example
A client pays $10,000 into an ILP, then free-looks on day 10. Over that period the funds dropped 8%, so the units are worth ~$9,200. Under Notice 307 the refund tracks market value (~$9,200), plus any recoverable charges per the policy — not the full $10,000 (verify exact formula).
Takeaway
14 days to free-look a policy, 7 days to cancel a fund — and ILP/CIS refunds are at market value, not cost. All durations here are minimums/typical — hedge exact figures.
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