Do Life Insurance Policies Offer Grace Period?
Published On Sep 01, 2021
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Grace period is the maximum number of extra days allowed by the insurance company to pay your life insurance renewal premium. Grace period varies according to the method of premium payment.
There are two methods of paying premiums for life insurance policies:
- Single premium where you make a one-time lump sum payment.
- Annual payments can be divided into monthly, quarterly and half-yearly instalments as per the insurer’s discretion.
If you make annual payments, the maximum grace period available for renewal is 30 days. However, if you make monthly payments, you are eligible for only 15 days of the grace period. This is true for traditional life insurance products and term life insurance policies. However, for unit-linked insurance plans (ULIPs) the grace period is 75 days during the 5-year lock-in period.
What Happens After The Grace Period For Life Insurance Is Over?
In case you don’t renew your life insurance plan during the grace period, your policy lapses and your loved ones are left without financial protection in case of your death. A lapsed term insurance policy is a huge loss for the policyholder because he loses the entire premium he paid so far and the insurance coverage as well.
However, if the policyholder dies during the grace period, his family is eligible to receive the death benefit after deduction of the unpaid premium. You should ensure that your term life insurance never lapses by following a few simple rules.
Must Read: Term Insurance Plans With Maturity Benefits
Should You Buy A New Plan Or Revive A Lapsed Life Insurance?
Most insurance companies give customers the option to revive their life insurance plans. The terms and conditions vary according to the policy guidelines of the insurer. You may also be required to undergo a medical test for reviving the policy. Generally, you have a timeframe of 2 years to revive your term insurance plan but you’ll have to shell out extra money in the form of revival fees, interest charges, penalty and costs of medical tests.
You should compare the costs of taking either of the two steps, i.e. policy revival or purchasing new life insurance. If you had bought the lapsed life insurance plan when you were 35 years of age and wanted to buy a new one at 45, it may cost you more. If you are still within the allowed 2-year period, add the costs of revival which includes your two-year premium, revival fees, interest, penalties and medical tests.
There are times when insurance companies introduce schemes for reviving lapsed policies at attractive discounts; you should take advantage of such opportunities. However, the best way to keep your family protected is to never allow your term life insurance policy to lapse.
Also Read: How To File A Claim For Term Insurance?
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.