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 life insurance 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 provision from life insurance companies. Make sure you understand the terms of the grace period for your policy, and always keep track of when the premium reminder should be coming. Do not hesitate to call the company or your agent if you think you should have received a premium reminder, but haven’t.
Do not hesitate to share. It can make a positive impact on someone's life.
The book "From the Rat Race to Financial Freedom" has many such investment concepts explained in a very simple and uncomplicated manner, especially in the Indian context.
Cheers
Manoj Arora
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ReplyDeleteIts a very useful post. I got to know so many interesting facts about life insurance policy. Thank you for explaining about grace period.
Really nice job!!The grace period is a very generous provision from life insurance companies. Make sure you understand the terms of the grace period for your policy, and always keep track of when the premium reminder should be coming.thanks for sharing..
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Cheers Chandu !
DeleteYour way to enlighten everything on this blog is actually pleasant, everyone manage to efficiently be familiar with it, Thanks a great deal.joint term life insurance types
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