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Monday, August 20, 2012

Grace Period in your Life Insurance Policy

 
What is Life Insurance Policy?
A contract under which an insurance company agrees to pay money to a designated beneficiary upon the death of the policyholder. In exchange, the policyholder pays a regularly scheduled fee, known as the insurance premiums.
What is a Grace Period?
Typically, all insurers of life insurance companies provide for a grace period for the payment of the premium towards the policy. Grace period is typically 30 or 31 days from the due date of the insurance premium. You must check your policy documents for the exact grace period applicable for your policy. No penalty - either as interest or delayed payment - is required to be paid if full premium is deposited during the grace period.

What happens in case of death during the grace period?
The policy stays in force during the grace period. If the insured dies on the premium due date or during the grace period, the premium due for the policy month in which the insured dies will be subtracted from the death benefit. Apart from this, there is no other impact on the death benefit of the policy as long as the death happens during the grace period.

What happens if you do not pay by the end of the grace period ?
If you do not pay any premium by the end of the grace period, this policy will lapse as of the premium due date. You may put the policy back in force by meeting the requirements of the Reinstatement provision. In such a scenario, the beneficiary is not applicable for any death benefit. For re-instating the policy, it is advisable to read the policy documents and comply to the stated requirements.

What if you are moving from one insurance provider to another ?
Never cancel a policy that you are replacing until the new policy is in force. If you actively cancel a policy THERE IS NO GRACE PERIOD. You can let it go into the grace period if your new policy is close to going in force, but you and your agent should be very careful not to let it lapse until the new policy is in force.

Summary
The grace period is a very generous thing insurance companies provide. Make sure you understand it and always keep track of when the premium reminder should be coming and don’t hesitate to call the company or your agent if you think you should have received a premium reminder, but haven’t.

Take care

Cheers

Manoj Arora
 


2 comments:

  1. It is a pretty job. This write up contains useful information which helps us a lot. Home Insurance Riverside, CA

    ReplyDelete
  2. compare commercial insurances
    Its a very useful post. I got to know so many interesting facts about life insurance policy. Thank you for explaining about grace period.

    ReplyDelete

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