A 45-year-old California buyer cancels a variable life insurance policy during the statutory free-look period. Under Section 10127.9, the refund to the policyowner must equal:

Why A is correct

Section 10127.9 requires a free-look, or cancellation, period of 10 to 30 days on California life insurance policies, with a full refund of premiums for fixed policies. For variable life insurance, however, the refund is the account value of the policy rather than the premiums paid, because the money was invested in a separate account whose value may be more or less than the amount contributed. This distinction between the fixed-policy premium refund and the variable-policy account-value refund is a classic California exam point.

Why the other options are wrong

• B) A refund of all premiums is the rule for fixed policies; variable policies refund the account value instead of the premiums. A fixed policy owner receives premiums back, while a variable policy owner receives the account value instead.
• C) A 90 percent refund is not a California free-look standard for any life insurance policy. No California life insurance product provides a 90 percent refund during the statutory free-look window.
• D) Surrender charges do not apply to a free-look cancellation; the account value is returned without surrender penalties during the window. The statutory refund for a variable policy is the account value, with no deduction for surrender charges.

Memory hook

Variable free-look refunds the account value, fixed refunds the premiums. Investments can shrink even in the cooling-off week.