Various individuals who have a term insurance plan find it quite challenging to renew their plan on or prior to policy expiry date. In order to help the policyholder to retain their plan features and avoid paying any kind of penalty for the late renewals, the insurers offer a grace period. In 2016, various individuals faced economic difficulty or an unexpected cash crisis because of demonetization.Read more
To ease the situation, IRDAI provided 30 days’ grace period for paying the term premium rates and renewing the plan. As per IRDAI guidelines, grace time for term insurance varies depending on the premium payment terms such as yearly, half-yearly, quarterly, or monthly.
Let us look at the term insurance grace period in detail:
The grace period in term insurance is the maximum number of days permitted by the insurer to pay the renewal premiums of life insurance. The term insurance grace period varies on the basis of the types of the premium payment method chosen.
There are 2 ways of paying premiums for term insurance plans in India:
Single-Premium Pay: In this, a 1-time payment of premium is made in a lump sum type at the time of purchasing the plan.
Regular Premium Pay: In this, you can pay the term premium amount yearly, half-yearly, quarterly, or monthly according to your requirement.
If you opt for annual payments of premium, the maximum grace time available for renewal is of 30 days. However, in the case of monthly premium payments, you are entitled to 15 days’ grace time.
The below table will help you provide information about the term insurance grace period based on the frequency of premium payment you select.
|Mode of Paying Premium||Grace Period|
If because of any reason, you miss out or fail to pay the term insurance premium amount and renew your plan within the grace time, the insurer will cancel the plan. This simply indicates that you and your loved ones will no longer be protected financially. A policy that gets lapsed is an important loss for you as the premium paid by you will not be returned and you will also lose all the insurance security.
However, in case of an unforeseen death, while you are in in the middle of the grace time, your loved ones are eligible to get the death benefit/payout as per the T&Cs of the policy. Also, while paying the death benefit, the insurer will deduct the premium amount that is not paid.
Most insurers give clients the option to revive their term plan and the plan’s T&Cs vary according to the plan guidelines of the insurance company. Sometimes, one might be required to undergo a medical examination to revive the plan. Typically, in order to revive the term insurance plan, a 2 years’ timeframe is provided to the policyholder but he/she has to pay out extra money as revival fees, penalty, medical test costs, and interest charges.
It is important to compare the prices of opting for either of the two alternatives: Buying a new term plan or Revival of term insurance policy. If you had purchased the lapsed term plan at 35 years and want to purchase a new term plan at 45 years, then it might cost you extra. And, if you are within the two-year time, add revival costs that include premium costs of 2 years, revival fee, penalties, medical tests, and interest.
There are times when insurers introduce options to revive lapsed policies at good discounts; then you should take benefit of these chances. However, the best way to keep your loved ones secured is to never allow the term plan to lapse.
The death claims raised after the term insurance grace period can get rejected by the insurance company if you miss or fails to pay the premium amount within the set time period.
Other advantages of your insurance plans such as waiting time and no claim bonus for pre-existing ailments become not applicable after the grace period for term insurance lapses.
All the insurance providers want the grace period of term insurance to be as low as possible
At the end of the term insurance grace period, a plan may get canceled because of non-payment of premiums, which can be unfavorable to you.
29 Sep 2022Term insurance is the most affordable type of life insurance...
29 Sep 2022Organs plays an important role in the daily body’s...
23 Sep 2022Zero Cost Term Insurance is a new variant of term insurance that...
07 Sep 2022Term insurance is the most common type of life insurance product...
05 Sep 2022A coma is a long unconsciousness because of insufficient...