- Even if you miss your life insurance premium payment due date, you can prevent your policy from lapsing by making payment within the grace period
- Grace period is a defined time period after premium due date during which the premium can be paid without the policy lapsing
- During the grace period, no late fee is charged
Life Insurance plans are long-term contracts that usually last for periods as long as 30-40 years. The life insurance cover remains in-force during the policy period as long as renewal premiums are paid within the specified due dates. It is quite possible that during the policy period, the policyholder may miss paying a premium within the due date. This could be due to inaccessible payment modes, unavailability of funds, ill health, emergency expenses, etc.
So, what happens when you miss your premium payment? Does your life insurance policy expire? What about all the premiums you’ve paid? Is there a way you can continue enjoying the benefits? Thankfully, life insurers have taken this situation into account and offer you ‘Grace Period’. It is the additional time duration provided for you to pay your life insurance renewal premium. All life insurance policies offer this benefit.
- What Is 'Grace Period'?
Grace period is defined as the period of time, after the premium due date, during which the policyholder can make the premium payment, while still availing all the benefits of life insurance cover. The duration of grace period depends on the frequency of premium payment (Monthly, Half-Yearly or Annual) and the type of insurance plan.
The grace period is usually 15 days for monthly premium payments (regular) but increases to 30 days for longer payment options such as yearly and half-yearly. Most insurers send you a reminder for the premium payment well before the due date and subsequently inform you if the policy has entered into the grace period.
- Policyholder’s rights and duties during grace period
Life insurance cover continues even when the policy enters the grace period. The sum assured, the scope of coverage and all other features of the plan remain unaffected. The premium amount also remains unchanged and no penalty is charged. Policyholder must pay the premium within grace period otherwise the policy will lapse and all policy benefits will cease.
- Claims during grace period
In case of the unfortunate demise of the policyholder during the grace period, the claim filed by the nominee will be honored by the life insurance company. The normal procedure for claim settlement will be adhered to.
Let us take the example of a policyholder whose life insurance policy’s yearly premium payment due date falls on 9th of September every year. He forgets to make the payment on 9th September in the 5th policy year. From next day, his policy enters the grace period. On 13th of September, which is four days later, the person suffers a fatal heart attack. His appointed nominee files a claim on 18th September. Since the policy is still in grace period of 30 days, and the claim has been made within such period, the insurer will settle the claim for the sum assured as it would have in an in-force policy. The claim will be settled as per the terms and conditions of the policy.
Read more about the Claims Practice at Exide Life Insurance