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The grace period in life insurance refers to the additional period provided by the insurers for the policyholders to pay the premiums after the end of the premium due date. If the policyholder fails to pay the premiums during this period, the policy will lapse, and the cover will terminate. Let us see what the grace period in insurance is and how the death during the life insurance grace period affects the nominees.
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Let us understand how grace period in life insurance policy works with the help of an example:
A fifty-five year old man is diagnosed with brain cancer and has to be admitted to the hospital. He had maintained a term policy for the last twenty five years, with regularly paid premium payments. His family relocates to a new address for his treatment, and his unfortunate demise occurs within a few weeks of the relocation. When his son makes an insurance claim, he finds that his father has missed a notification from the bank, and the last premium for his father’s term insurance has gone unpaid.
In such a situation, the policy enters a grace period, which is like an interval between premium due date and lapse of policy and is one of the best benefits of term insurance. If there was no grace period, then a person unable to pay his premium due to sudden emergencies would find his coverage unfairly cancelled. It is for this reason that all insurance providers allow a grace period of 15 to 30 days.
Note: Know what is term life insurance first and then buy a term plan for your loved ones.
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Here is a list of facts about death during life insurance grace period that you should keep in mind:
The sum assured remains unaffected even if the premium is not paid within the due date. The grace period in life insurance policy is essentially an extension of your regular premium payment mode (monthly, quarterly, biannual or annual). Therefore, the policyholder is not penalized for premiums paid during the grace period.
Some deductions may be made. If the policyholder dies within the grace period in insurance before the premium is paid, then the insurance provider will deduct the value of the premium from your death benefit. Keep in mind that this is not an additional fee paid. This is the amount which would have been paid by the policyholder, eventually, to keep his plan active.
Note: Check out the best term life insurance in India and choose one that suits your requirements.
The grace period in life insurance policy may vary based on payment mode and provider. It is usually 30 days for annual, bi-annual, and quarterly premium payment modes, but it can be 15 days for monthly premiums. The provider will inform you before your due date and also afterwards to inform you that you have now entered your grace period. Alternatively, you may reach out to your insurance agent for payment details.
You can make your claim during the grace period in life insurance policy, as you would during the main policy term. All relevant documents and forms should be used to file for a claim on death during life insurance grace period, as per regular T&Cs. As long as death occurs during the grace period, which begins the day after the due date, you are eligible for compensation.
Active cancellations do not come with a grace period in life insurance policy. If you are changing your insurance provider, it is better not to cancel your previous insurance till the new plan is in place. If you cancel a plan, no compensation will be provided even if an unfortunate event takes place just one day later. So, it is better to let the policy go into a grace period when your new plan is just about to come into effect.
Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying.
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The grace period in life insurance policy is a facility provided by banks that ensures uninterrupted coverage in such cases. If the person whose life is covered dies during the grace period and the premium was not paid, the nominee will still be eligible to receive the death benefit. However, to ensure consistent coverage, it is better to switch to a more manageable mode of payment (monthly or quarterly) in case the policyholder is unable to pay an annual premium due to financial constraints.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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