There comes a time in everyone’s life when we experience a financial crisis, causing us to prioritise certain payments and deprioritise others. During such a period, you may fail to pay your insurance premium on the due date. But worry not! With the help of a grace period, you can continue the insurance plan without any hitches. So, keep reading to know all about the life insurance grace period.
What Is Grace Period in Life Insurance?
Grace period is some additional number of days granted to you by the insurance provider to pay your life insurance premium. If you were to miss your payment due date, the grace period helps you by offering some extra time. This period can vary based on your premium payment frequency, where a monthly insurance payment option has a grace period of 15 days. Such a feature becomes a lifesaver during a financial crunch or in the event, where you forget your insurance due date.
What Happens If You Fail to Make Payment During the Grace Period?
If you fail to make your premium payment within the grace period, you shall lose all benefits of life insurance and the policy shall lapse. Therefore, you will lose your risk cover and all the premiums paid over the years. Such lapsing of life insurance can be a huge loss as your loved ones will no longer have a financial backup in case something were to happen to you.
Most life policies come with a long premium payment tenure ranging from 15 to 25 years. Thus, failing to pay within the grace period shall mean all the premiums paid so far have gone in vain. So, let’s look at some key drawbacks of not paying your life insurance premium on time:
- Loss of insurance cover
The basic feature of an insurance policy is the life cover, which acts as a financial backup for your loved ones. So, if your policy were to lapse, you would lose the insurance coverage. Thus, in your absence, your family would only have the savings accumulated over the years to manage all their expenses.
- Loss of coverage against other risks
You can combine your insurance plan with add-on covers such as accidental death cover, critical illness cover, loss of income cover, etc. which offers protection from such unfortunate risks. However, once your policy has lapsed, you no longer have coverage from such uncertainties.
- No access to other lucrative perks
Apart from term plans, life insurance policies have a maturity payout, loan against policy feature, surrender value option and tax benefits. All of these features and benefits that can be a lifesaver shall no longer be accessible once your plan lapses. Therefore, it is best to pay your premium on a timely basis.
Should You Revive Your Old Plan or Buy a New One?
After falling back on your insurance payments, the most common question that might strike you is if you should buy a new policy or revive the lapsed one. When you consider reviving your old policy, there are several charges involved, making it a hefty affair. Some of them are policy revival charges, interest fees, medical check-up charges, etc.
The period of policy revival and the fees can vary based on the various types of life insurance policies and the insurer. Therefore, it is recommended to review the total cost of reviving your old plan and buying a new one. By comparing these two figures, you can decide a more suitable option.
With this, you must have learnt everything about the life insurance grace period and the cons of failing to pay your premium. To estimate how much sum assured is suitable for you and your dependents, use a life insurance calculator.