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Life insurance plans serve as a valuable safeguard for our lives. However, various people often overlook the crucial aspect of keeping their insurance plans active through regular premium payments. Life insurance benefits are only available if the premiums are paid on time. If you miss a premium payment, insurers generally offer a grace period, giving you a second chance to make premium payments.
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In simple terms, grace period is an additional time provided after the due date to pay the premium and prevent the policy from lapsing. This period is mentioned in the contract.
Grace period is the additional time offered by your insurer provider if you cannot pay your premium on time. The grace period is given to ensure that the insurance policy does not get lapse and you cannot enjoy the benefits of the policy. Generally, insurers provide a grace period of 30 days, however it differs from company to company and from policy to policy.
There are two methods to pay premiums for life insurance plans:
Single premium: This is where you make a one-time lump sum payment.
Annual payments: This is divided into monthly, quarterly, and half-yearly installments.
Learn more about Grace period in Term insurance
Term Plans
It is very important to pay timely premiums. Non-payment of timely premiums even after the grace period can have the following disadvantages:
Loss of sum assured : If the policyholder fails to pay the premium for the term insurance plan even after the grace period is over, the policy will lapse . The policyholder will face a loss in the cover/Sum assured that was to be provided by the insurer.
High cost of renewal : If the policy gets lapsed, the benefits of the policy are revoked. If the policyholder wants to get his or her insurance policy renewed, he or she may have to pay a penalty.
Hassle at a later stage : When one is of young age, it is easier to get affordable premiums. However if the policyholder fails to pay the premium for the policy even after the grace period is over, the policy will lapse .This might create inconvenience for the policyholder to invest in a new insurance policy at a later stage. This is because the premiums that we pay for the policy are expensive later than when we pay it at a younger age.
Note: You can easily calculate your premiums using term insurance calculator
In case you don't renew your term insurance plan during the grace period the policy lapses and your loved ones are left with no financial protection incase 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.
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Most insurance providers offer customers the opportunity to reinstate their term insurance policy, subject to the insurer's specific terms and conditions. Reinstatement typically involves undergoing a medical examination as per policy guidelines. Generally, there is a window of 2 years within which you can reinstate your term insurance policy, however at an additional cost comprising revival fees, interest charges, penalties, and medical test expenses.
It is advisable to compare the expenses associated with reinstating the policy versus purchasing a new term plan. If you are still within the 2-year reinstatement period, calculate the total expenses including the two-year premium, revival fees, interest, penalties, and medical tests. After this cost benefit analysis make an informed decision.
The grace period in insurance provides a crucial buffer for policyholders who may experience temporary financial constraints or oversights in premium payments. Timely payment within the grace period is essential to avoid the loss of policy benefits, potential higher costs for renewal, and unnecessary inconvenience in securing future insurance coverage.
†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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