Can you use the life insurance premium grace period to your advantage? It is possible, provided your insurance provider permits it. You see, it can be tricky to allow your premiums to be due, without making further payments. Some life insurance companies can cancel the policy as soon as the last premium payment is due.
In this article, we discussed what a grace period is in life insurance and how you can take advantage of it.
What is the Life Insurance Grace Period?
This is the limited time a life insurance policyholder has to make another premium payment or risk losing the policy. Depending on the state and the insurance provider, the duration may be for a few days or a few weeks.
The rule of thumb is to take advantage of the grace period to pay your premium to keep the policy active.
How Long is the Grace Period for Life Insurance?
The grace period for life insurance can be anywhere between a few days and a few weeks. It is rare to find an insurance provider that offers a few months of a grace period.
How Does Grace Period in Insurance Policy Work?
It works by becoming a window for you to make another premium payment. Typically, your life insurance company leaves the policy running the time until you make payment.
What this means is that you can take advantage of the life insurance coverage grace period to enjoy full coverage of the policy. You may still be able to claim if the grace period is active.
For example, you can request a cash out for something important or make important changes to the policy.
What Happens During the Grace Period of Life Insurance Policy?
Is there any opportunity for you during the grace period? Yes, there is! You can still enjoy every other privilege that comes with the policy. This includes financial protection and making third-party claims.
The idea is that the life insurance provider is expected to keep the policy active within a specific time. On your part, you must pay the next premium so the policy’s length can continue.
What if I’m Unable to Pay My Premium?
The life insurance grace period is only open for a while. For example, the availability or duration of the grace period varies by the payment method you use.
If you pay monthly, the grace period is 15 days. After then, the insurance provider is permitted to terminate the policy.
Policyholders who pay premiums quarterly can have their lifeinsurance grace period extended to 30 days. The same applies to policyholders who pay annually.
Once you fail to pay the premium within this time, the policy will be terminated. You will then have no life insurance policy, meaning that your loved ones wouldn’t receive a death benefit when you pass away.
The Tricky Sides to Life Insurance Grace Period
Using a life insurance grace period can help you source money to pay your premium. However, there are some tricky aspects that you need to be aware of.
1. Loss of Privileges
Once the grace period is over, you will lose all privileges. This includes the termination of the life insurance policy and the loss of the premiums you already paid.
2. No Death Benefit
Since the policy is terminated, it is considered “inactive.” Therefore, the people you named as beneficiaries wouldn’t receive death benefits when you pass away.
3. How About Passing Away During a Grace Period?
This is one of the trickiest aspects of relying on a life insurance policy grace period. Policyholders that pass away during the grace period may have the death benefits paid to the beneficiaries.The primary consideration here is that the policy is still active.
However, your life insurance company will deduct the unpaid premiums. For example, if the grace period is 15 days,the company will make a premium payment deduction for 15 days from the death benefits. The remainder of the money would then be paid to your beneficiaries.
How Do I Know that I am Using Life Insurance Policy Waiting Period?
It is easier to know if you keep tabs on when the premiums are payable. For example, if you pay your life insurance premiums on the 25th of every month, your grace period would likely start from the 26th of that month.
That notwithstanding, you should get a message, telephone call, or an email from your insurance provider notifying you of the grace period.
Some life insurance companies also inform the policyholders when the grace period is due to end.
That way, you will hurry up to pay the next premium or risk losing the coverage.
What Can I Do after my Life Insurance Premium Grace Period is Over?
Once the grace period is over, the life insurance expires. Therefore, you have two options to choose from.
Option #1: Revive the Life Insurance Policy
This is the most common option for life insurance policyholders at the expiration of the grace period.
With this, you can “revive” or get back your “expired” life insurance policy. Note that this option is only available for policyholders whose coverage ended in the last two (2) years. Some insurance providers may allow you to revive the policy after five (5) years of expiration.
Reviving the policy isn’t easy, though. Some terms and conditions guarding it are:
- Payment of Revival Fee: Your life insurer would require you to pay a “revival fee,” being the money paid to get back the coverage.
- Penalty Payment: You will also be asked to pay a specific amount of money, being the fee for allowing the policy to enter the “grace period.”
- Additional Fees: Some additional benefits required to revive the policy include interest charges.
- Medical Testing: Depending on the life insurer, policyholders may be asked to take another series of medical tests. The idea is to confirm if your health status changed within the time the policy wasn’t active.
Option #2: Purchase a New Life Insurance Policy
If you don’t want to make all the payments detailed above, go for this option. All you have to do here is to purchase a new life insurance policy and start all over again.
The downside to this is that you would lose every other privilege (including death benefits) in the previous life insurance policy.
Final Words: Take Advantage of Life Insurance Premium Grace Period
A life insurance premium grace period is an opportunity for you to “rejig” your policy and keep it active. Strive to pay your premium within this time and enjoy the coverage to the fullest or allow it to expire before buying a new one.
