Sometimes, the term insurance policyholders become unable to pay the premiums on or before the policy expiry date. To help such policyholders retain their term plan benefits and avoid paying the late renewal penalty, insurance providers offer the facility of the grace period. So, the grace period is the additional time provided by the insurance company to pay the premium.Read more
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To put it simply, a grace period is an additional number of days provided by the insurer to pay the premium of the term insurance policy and renew it. The grace period can be different for different premium paying methods.
Generally, the insurance providers in India offer two methods to pay the premiums, which are:
As the name suggests, in single pay, the policyholder has to make the payment of the premium only once in a lump sum at the inception of the policy. Whereas, in regular pay, the policyholder has to make the payment of the premium in regular intervals like monthly, quarterly, half-yearly, or annually. Here, the policyholder has to choose the premium payment mode at the time of policy purchase.
Therefore, the grace period may vary as per the premium payment term selected. The below table shows the grace period in term insurance as per the premium payment frequency selected by the policyholder:
|Premium Payment Frequency||Grace Period (Days)|
In case the policyholder even misses the grace period and/or due to some reason does not pay the premium even during the grace period, then the insurer cancels the term insurance policy. This simply says that the policyholder and his/her family will not have any financial protection. A lapsed term insurance policy is a significant loss on the part of the policyholder as he/she loses the previous premiums paid and is also left with no insurance cover.
In case of the policyholder's unfortunate demise during the grace period, his/her family receives the death benefit according to the terms and conditions of the term insurance policy. However, the point to note here is that the company will deduct the unpaid premium in such a case from the death benefit.
Most of the insurance providers in India provide the facility to revive the lapsed term insurance policy within two years after the completion of the grace period in the term plan. However, the revival conditions may vary with the insurer. One may have to pay additional charges such as interest revival fees or penalties. Some insurance providers may ask the policyholder to undergo a medical test in case of policy revival. In addition to this, the policyholder has to bear the charges of medical tests as well.
Therefore, if you are in doubt about whether to buy a new term plan or revive the older one, compare the charges first and make any decision accordingly.
If a policyholder thinks that everything is lost, if he/she misses a payment of the premium of his/her term plan, it is not true. Every insurer offers a grace period as per the premium paying term, and one can pay the premiums during this time to renew his/her term plan. However, even after missing the grace period does not show that the policyholder lost his/her plan, there is always a way to revive a lapsed term plan.
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