Grace Period

Definition:

The specific additional time you get, from the insurance company, after the due date to pay the premium and avoid lapse is called Grace Period.

Description:

In simple words, it is the additional time you get after the policy due date to pay the premium to avoid policy lapse. If you do not pay the premium even during the grace period, the policy will end. All the benefits payable under the policy will lapse.

Depending on the insurer, the grace period can be as little as 24 hours to as long as 30 days. The insurance grace period is mentioned in the policy. Premium payment after the grace period will attract financial penalties.

A grace period under the insurance policy is a provision where the insurer intends to provide the entire coverage to the policyholder even if they come with the late payment within the grace period. Failing to pay the premium within the grace period, the insurance company has the right to terminate the policy.

Example:

Smita purchased a child plan from an Insurance Company. She was not able to pay the premium as she lost her job after 5 years of work. The policy indicated the grace period of 30 days. Somehow, Smita managed the premium during the grace period and the policy continued. Had Smita not paid the premium even during this time, the policy would have been terminated by the insurance company.

Back

ADV/5/22-23/290