CMFAS CM-EIP Life Insurance & ILP Basics question: cancelled within the free-look period

CMFAS CM-EIPLife Insurance & ILP Basics

When an ILP is cancelled within the free-look period, how is the refund typically treated compared with a non-linked policy?

A The refund is always the full premium paid, with no adjustment of any kind
B No refund is available for ILPs, because the premium has already been invested
C The refund is adjusted for any change in unit value over the free-look period
D The refund is fixed at the surrender value calculated years later

Show the answer and explanation

Answer: C. The refund is adjusted for any change in unit value over the free-look period

For investment-linked policies the free-look refund is adjusted for any fall (or rise) in unit value over the period because the money was already invested, so the amount returned may differ from the premium paid.

Common mistake

Expecting a full unadjusted premium refund for a market-linked policy.

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CMFAS CM-EIP Life Insurance & ILP Basics question: cancelled within the free-look period

Answer: C. The refund is adjusted for any change in unit value over the free-look period

Common mistake

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CMFAS CM-EIP Life Insurance & ILP Basics question: cancelled within the free-look period

Answer: C. The refund is adjusted for any change in unit value over the free-look period

Common mistake

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