Glossary: Cooling-off period
The period of time you’re allowed, after signing an agreement, to cancel it without incurring a financial penalty. Financial products including banking, credit, insurance, personal pensions and investments are subject to a 14-day cooling-off period (this is 30 days in the case of life insurance and personal pensions). The insurer or broker must refund any money paid by you within 30 days, although it has the right to deduct a reasonable admin charge, and a sum proportionate to the number of days’ cover you had. If you have any related credit agreements, these will also be cancelled.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).