What is an Insurance Grace Period
It isn’t uncommon to miss making an insurance payment. With the number of bills that need to be tracked and paid, missing the payment of one has become classified as ‘usual’. The result of a delayed payment begs the question - what are the repercussions of my actions? Fret no more, as the insurance grace period is guaranteed to have your back at all times. Insurance grace periods buy you some time to make your pertinent payment. Read on further to understand what it is and how it works.
What is an Insurance Grace Period?
After the passage of the original due date of an insurance payment, a certain amount of time is awarded to every individual, within which the payment has to be made. This extra time provided to every individual is known as the grace period - the insurance coverage will not lapse if the payment is made during this period. However, if you have surpassed this period, you may face the risk of your insurance getting cancelled and may have to pay some penalty fees to your insurance provider.
The reason behind the establishment of an insurance grace period is to ensure that every individual is given a fair chance to cover their insurance bills, especially in situations of unforeseen circumstances. Every insurance grace period and its corresponding penalty varies as per the insurance provider you have.
How does an Insurance Grace Period work?
Insurance companies usually prefer to keep an insurance grace period as short as possible, as until the grace period is still in effect, the insurance providers have to dispense insurance services to their customers. In other words, the insurance provider will have to bear the expenses of an individual’s insurance even during the grace period, which does not work out entirely in their favour.
If your grace period has been passed, it may adversely impact you. Firstly, if you surpass the grace period, your insurance will get cancelled and you will have to start the insurance application process from the beginning. Secondly and most importantly, some insurance providers will only provide you with another insurance if they have some collateral in the form of a larger down payment on your premium. This is why it is mostly recommended to make your insurance payments on time, rather than waiting till the end of your grace period to do so.
Health Insurance Grace Period versus Life Insurance Grace Period
Grace periods are usually provided to insurance holders to ensure that in case of any emergencies, they are financially taken care of and have less stress on their shoulders. However, health and life insurance grace periods are the worst types of grace periods to ‘mess with’. If you miss your grace period renewal date, your insurance provider will mostly reject your insurance coverage and will not allow you to file a claim, even if you can make the premium payment on the next day. This can paint a frustrating picture in times of emergency health situations.
Many individuals use the terms ‘health insurance’ and ‘life insurance’ interchangeably but they are two different terms. Below, we explain the difference.
|Particulars||Health Insurance||Life Insurance|
|How it helps||Takes care of your treatment in hospitals. It is more common to invest in this as compared to life insurance.||Relieves you of any financial burden by reducing your financial expenses in a situation of your untimely death.|
|Benefit||Hospitalisation and treatment expenses are covered.||A death benefit is paid to your nominee.|
|Coverage Type||Individual, group, family.||Individual, group.|
|Relevant Tax laws||Section D of Income Tax Act.||Section 10 (10D) under Section 80C of the Income Tax Act.|
Car Insurance Grace Period
Car insurances have varying grace periods as well, depending on the company you approach. They too are subject to being cancelled if the grace is surpassed. Grace periods are given to Car Insurances because travelling in an uninsured vehicle can lead to you bearing exorbitant expenses in case you and your passengers meet with an accident. It is, for this reason, important to look into good Car Insurance coverages. The ICICI Bank Car Insurance is one of the most reputed Car Insurances in India, in terms of the benefits it provides its customers.
Finding an insurance that has a long grace period is important, as this dictates the duration of extension you are given in case of a delayed payment on your premium. Insurance grace periods are especially important for three types of insurances- Life, Health and Car Insurance.
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