A California insured purchases a variable life policy and then exercises the free-look right within the permitted period. The refund the insurer must provide is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under California Insurance Code Section 10127.9, life insurance policies must provide a free-look period of 10 to 30 days, as chosen by the insurer, during which the policy may be returned for a refund. For variable life policies the refund is the policy's account value on the date of cancellation, because the funds were placed in separate accounts and carry investment performance. For non-variable policies, the full premium is refunded within 30 days of the return. This difference protects the insured from market loss during the free-look period while acknowledging that variable products have no fixed premium base to return. The free-look right is a California-specific protection that agents must disclose at delivery.
Why the other options are wrong
- A full premium refund applies to traditional, non-variable policies during the free-look period; variable policies refund the account value because the funds were invested.
- Surrender charges do not apply to a free-look cancellation; the account value is returned without penalty during the statutory free-look window.
- There is no California rule refunding only half of the premium; the free-look refund is either the full premium or the account value depending on the product type.
Memory hook
Variable life free look = you get back account value, not the sticker price. Premium refunds are for plain-vanilla policies.