Insurance Grace Period
Reviewed by Aug 27, 2020| Updated on
What is an Insurance Grace Period?
An insurance grace period is the specified time wherein the policyholder is allowed to make payments towards the premium to avoid lapses in the coverage. The provider can revise the grace period, depending on the type of policy and the insurer.
The insurance grace period can vary from as low as 24 hours to as much as 30 days, depending on the policy the individual has subscribed to. The insurance policy agreement states the grace period given and making the payments after the due date can attract additional charges in the form of a penalty.
Understanding Insurance Grace Period
Insurance grace periods shield policyholders from the immediate loss of coverage in case they delay the payment of premiums. Insurance grace periods depends on the type of policy the subscribers hold and are monitored and managed by a regulator. However, many issuers still drop their policyholders immediately on defaults without any prior notice.
Insurance firms generally try to shorten the insurance grace period to avoid instances where they will be required to cover for damages even if the policyholder has not paid the premium.
The insurer is responsible for paying the policyholders for any services they are eligible for as long as the insurance grace period is still active. There are no exceptions that state that the company will have to cover for the damages in a cancelled policy due to non-payment.
In such cases, you might be required to start the entire process from scratch. Meaning you might be required to subscribe to the insurance policy again.
Since most insurance applications often require to mention if you have ever cancelled a policy, you are most likely to be labelled a high-risk customer in the case of any prior cancellations of your policy. Also, the insurance company might attract higher premiums on your policy.