When it comes to paying bills on time, not everyone is the same. While most people will ensure the check is in the mail in plenty of time, others will forget about the payment in the first place.
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In the case of a life insurance policy, paying on time would seem to be of paramount importance. After all, the insurance company is holding up its end of the bargain by providing the benefits, but you must supply the premium payments every month.
Fortunately, a life insurance grace period allows you the time to catch up with your payment and not lose your coverage.
What Happens if Life Insurance Goes into Grace Period Status?
The grace period for life insurance is, for most policies, 30 days after the payment is due, where it can still be sent in with no penalty.
The grace period was created so insurance companies could not cancel a policy quickly if the payment did not arrive in the office by its due date.
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Until recently, most premium payments were made through the postal service, and unexpected delays could keep the check from arriving at the insurance company.
You forget to pay, and this is normal.
While today more people are using their credit cards and paying over the phone, through the internet, or even by direct payment through their bank account, the grace period still exists so that anyone who forgets to make a payment can do so without putting their life insurance in jeopardy.
The grace period is when people will be reminded that their premiums are overdue, and they can make the payment while keeping the coverage.
However, if the policy goes past the 30 days it will go out of effect and will need to be renewed.
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In most cases, catching up with the payments will be enough to put the policy back in force. However, if more than six months pass, the policy will have to be rewritten, which may include new health questions or even an exam.
What If Death Occurs During Grace Period?
It is an important question during the grace period of life insurance that the policyholder passes away. It may seem that the insurance company is under no obligation to pay the benefits. However, under the law, even if the life insurance lapse in payment goes for the first 30 days, the insurance company must pay out the benefit, although they can withhold enough money to cover the final premium payment.
This means that the full benefits will be paid minus the single month of premiums that were not paid. This should be good news to the beneficiaries, who can rest assured that the benefits will cover the expenses.
However, if death occurs after the life insurance grace period has passed, then the insurance company is under no obligation to pay.
So, it is important to make the premium payment within the 30 days grace period to ensure full coverage.