Grace Period In Health Insurance Policy

Insurance policies usually have a grace period for premium payment and renewal. Grace period is the amount of time beyond the premium due date during which a customer can still renew the policy without losing coverage.

Let us try to understand this with an example.

Mr. X has a health insurance policy that has a renewal due date of 30-Sep.

• Due to some unavoidable circumstances, Mr. X could not pay the premium by the due date.
• He is now worried that he lost insurance coverage.
• He seeks help from his Insurance Company which assures him that as per the terms and conditions in his policy, he has a grace period of 15 days. 
• So, Mr. X could pay the premium in the next 15 days that is by 15-Oct, without losing his coverage.  

If Mr. X still doesn’t make the payment, his policy will lapse. 

From the above example it might seem that the grace period is a simple, straight forward provision. However, depending on the type of insurance and the provider, terms and conditions of the grace period might vary widely.

Let us look at two of the important considerations with respect to health insurance.

Claims During Grace Period

The first thing to understand is about claims during the grace period. Do insurance companies allow a claim during this period? Well, it depends. There are a couple of ways the insurer may choose to deal with it:

• Allow a claim and also process it after deducting renewal premium 
• Allow claims but hold on processing till confirmation of policy renewal
• Reject any claims during the grace period

(Note: There could be many more ways, only few have been mentioned for explaining the point )

Grace Period Duration

There are two sub-parts here. The first one is straight forward: How long is my grace period? The second one could be a little trickier: What happens if I fail to pay even in the grace period?

1. How Long Is My Grace Period?

It varies from one company to another and also between plans. Sometimes even within the plan it could vary for the payment frequency. For e.g. an Annual premium may have a longer grace period (30 days) vis-à-vis the monthly premium for the same plan (shorter grace period of 15 days)

2. What Happens If I Fail To Pay Even In The Grace Period?

Can the grace period be further extended on request? Unfortunately, if the policy is not renewed even by the grace period, it lapses and coverage is lost. Personal requests for further extension of grace period are generally not entertained. Once a policy lapses, the insurer might allow a revival, or insist upon fresh application. Even in case of revival, the terms and conditions may vary between insurance providers. Some may allow accrued benefits to be reinstated after payment of renewal fee plus fine/penalty, while others might not. Some examples of that could be refusing accrued No-claim bonus (NCB), resetting the waiting period and/or Pre-existing clause (which is 48 months in many cases), etc. 

Conclusion

Grace period is a provision for those times when we forget to pay the premium by the due date, or require just a little more time to arrange the money. Whenever possible we should pay the premium by the due date, not rely on the last moment rush. Careful planning will ensure we continue to avail our healthcare benefits. Otherwise, hard earned benefits could disappear overnight leaving us vulnerable.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.