What is Insurance Grace Period

Providing insurance grace period to the policyholders is somewhat essential for an insurance company. It is because they may not always be in a good financial situation to pay insurance premium timely. You can think of insurance grace period as a shield for policyholders that prevent immediate loss of insurance coverage.

Regulations related to insurance grace period, such as how long it should last, are managed differently. Let’s talk about how the insurance grace period works with the help of an example –

Mr. Sethi bought a health insurance policy that expired on Sep 1, 2020, as he missed paying the premium by the due date. It happened because he lost the job and could not pay the premium as ever before.

Keeping that in mind, the chosen insurer gave him an insurance grace period of 15 days (till (Sep 26, 2020) to make the required payment. He made the most of this feature related to the policy and paid the premium in this insurance grace period to continue enjoying the coverage.

Some other facts related to the insurance grace period that you should know are:

• The death claims raised after the insurance grace period can get rejected by the insurer if you fail to pay the premium within this time period.
• Other benefits of your insurance policies, such as No Claim Bonus and waiting period for pre-existing illnesses, become invalid after the insurance grace period lapses.
• All insurers want the insurance grace period to be as minimum as possible to be on a safer side.
• After the insurance grace period ends, a policy may get cancelled due to non-payment, which can be detrimental to you.

In general, most life insurance policies come with an insurance grace period of thirty days from each premium's due date. In some cases, it also depends on the mode of premium payment chosen. For instance, the insurance grace period is fifteen days for life insurance policies bought with a monthly premium payment option.

You should also know that:

• During the insurance grace period, life insurance companies accept premiums without interest
• The insurance coverage continues during the insurance grace period as per the policy terms
• In case the life insured dies during the insurance grace period, the insurers are entitled to deduct the unpaid premiums from the death benefits payable under the life insurance policy
• Not paying the premium during the insurance grace period results in policy lapse. However, you can still benefit from revival period, which starts from the date of first unpaid premium. The insurer is entitled to approve or reject the policy revival application
• Lastly, suppose you do not revive a lapsed policy during the revival period. In that case, it will terminate or get discontinued, and you may not get any value in terms of insurance benefits after the life insurance revival period ends. However, you may still get the applicable surrender value, depending upon the plan terms and conditions.

There are many disadvantages of not paying insurance policy premium timely even after the insurance grace period, irrespective of the policy type.

As detailed above, there can be several drawbacks of not insurance premium till the due date, let alone till the insurance grace period ends. Particularly for life insurance policies like a term plan, not paying premiums during the insurance grace period means compromising with financial protection you have planned for your loved ones.

A lapsed life insurance policy comes with a huge loss for a policyholder as he/she loses the entire sum of all premiums paid earlier. Alongside, his family loses the financial support they would otherwise get under the policy.

The awareness of key life insurance features such as insurance grace period is on the rise among Indians, as recorded in the India Protection Quotient (IPQ 6.0) survey that was recently conducted by Max Life Insurance in association with Kantar. The survey recorded an increase in the knowledge quotient of Indians regarding life insurance products. In IPQ 6.0, this score was recorded as 61 as compared to the previous score of 57 recorded in IPQ 5.0.

Every insurance company in India provides the option of policy revival to their policyholders, though the related terms and conditions may differ from one another. Other than the insurance grace period, the policyholders get a revival timeframe, which may last up to two/three years as per policy terms and conditions It is when they need to shell out money to be paid as policy revival fees, interest charges, and medical test expenses.

It is at this stage after the insurance grace period that many people feel confused about choosing any of the two options - revive the existing policy or buy a new one. Being unable to pay the premium till the insurance grace period is something that can happen to anyone.

It is time to make an informed decision that will impact the insurance coverage for the future. Consider the total costs involved in reviving and buying a policy, and then compare them to arrive at a conclusion.