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 statements about Application Procedures are correct? 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
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Correct Answer: A
- 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:
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Correct Answer: D
- 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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