Part 5: Life Insurance Procedures
Paper III — Long Term Insurance · Part 5: Life Insurance Procedures
Further reading: Life Insurance Procedures study notes →
Which of the following correctly describes the cooling-off period arrangement for long term insurance policies? I. Cancellation within 21 days of receiving the policy or the cooling-off reminder letter, whichever is earlier II. Unconditional cancellation within 7 days of taking out insurance III. Cancellation within 30 days of taking out insurance, subject to deduction of administrative fees
Why: According to the Insurance Authority's requirements, the cooling-off period for long-term insurance is 21 days from receipt of the policy or the cooling-off reminder letter, whichever is earlier. If cancellation occurs during the cooling-off period, the policyholder can recover all premiums paid in full (subject to deduction of investment losses for unit-linked policies). The cooling-off period applies to all policyholders, not just those aged 60 or above.
When handling policy replacement, the intermediary's responsibility is:
Why: The Insurance Authority's guidelines require that when handling policy replacement, intermediaries must provide a written comparison of the old and new policies (e.g. coverage, costs, cash value differences), ensuring policyholders make informed decisions. Churning is when intermediaries recommend unnecessary policy replacements to earn commissions, constituting a mis-selling practice. Policyholders should fully understand potential losses from policy replacement, such as the new incontestability period and loss of benefits from the existing policy term.
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