What is the Cooling-Off Rule?

The cooling off rule is applicable to consumer protection, insurance, and finance.

Under consumer protection law, the cooling-off rule is a rule that the Federal Trade Commission (FTC) uses to protect consumers when transacting with sellers. According to the FTC, a buyer has a period of three days to cancel or revoke a sale made at their home, workplace or any other temporary location. The cooling-off rule is mostly applicable to door-to-door sales. 

The cooling-off rule is used in other contexts outside being a consumer protection law. Under securities law, the cooling-off period is the period of time after a prospectus is filed when the company cannot take further actions in offering securities for sale. 

In insurance, the cooling-off rule allows an insured party to cancel an insurance policy within fourteen days after the policy was issued. If after fourteen days, the insured party still wishes to cancel the policy, they will face a penalty.

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