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Term Insurance Grace Period

Various individuals with a term insurance plan find it quite challenging to pay their premiums on the due date. To help the policyholders retain their plan benefits and avoid paying any kind of penalty for late renewals,the insurers offer a grace period in term insurance.

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In 2016, various individuals faced economic difficulty or an unexpected cash crisis because of demonetization. The IRDAI provided a grace period for term insurance premium payment and plan renewal to ease the situation. As per IRDAI guidelines, the grace period in 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:

What is Grace Period in Term Insurance?

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 requirements.

If you opt for annual, half-yearly, and quarterly modes, the maximum grace period for term insurance premium payment available is 30 days. However, in the case of monthly premium payments, you are entitled to a 15-day grace period in term insurance.

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 in Term Insurance
Annually 30 days
Half-yearly 30 days
Quarterly 30 days
Monthly 15 days

What Will Happen After the Term Insurance Grace Period Gets Completed?

If, for any reason, you miss out or fail to pay the premium amount and renew your plan within the grace period in term insurance, 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, are in the middle of the grace period, 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.

Should I Revive the Lapsed Term Plan or Buy a New Term Plan?

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, penalties, 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 changes. However, the best way to keep your loved ones secure is to never allow the term plan to lapse.

Points to Remember About to Term Insurance Grace Period

  • 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, may not be applicable after the grace period for term insurance premium payment ends.

  • At the end of the term insurance grace period, the plan may be canceled because of non-payment of premiums, which can be unfavourable to you.

Wrapping it Up!

The grace period in term insurance is an additional period provided to the customers to pay their premiums after the end of the premium due date without worrying about lapsing the policy. The grace period for term insurance premium payment is different for different premium payment modes. You should always check the term insurance grace period mentioned in your term insurance T&Cs to avoid policy lapse in the future.

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