Grace Period Meaning in Term Insurance

What is a Term Plan?

A term plan is a type of life insurance plan that provides financial protection to your family in case of your untimely demise during the policy term. If the life assured covered under the term plan dies during the policy term, the insurance company pays a fixed amount of money (called sum assured) to the nominee. If the life assured survives the term, the nominee doesn’t get any money.

To keep the policy active, the policyholder must pay premiums on time. As per the IRDAI guidelines, grace period from the due date of premium is 15 days if the premium is paid in monthly installments. Whereas the period is 30 days where premium is paid in quarterly/half-yearly/annually.

What is the Grace Period in Term Insurance?

The term insurance grace period is the additional time given for payment of premium after the due date , without any penalty or late fee.. This period ensures that your life cover continues for a certain period even if you forget to pay the premium on time . The grace period allows you to keep your policy active without losing any benefits.

Let’s say your premium was due on 1st April. If you choose the quarterly mode, insurers offer a 30-day grace period, so you can pay it by 1st May without losing the coverage.

This buffer time is given by insurers to reduce the chances of your term plan getting lapsed due to a delay in payment.

Does Term Insurance Provide a Payout If Death Occurs During the Grace Period?

If the life assured dies during the grace period, their nominee can still claim the term insurance payout. However, the insurance company will usually deduct the past due premium from the total amount before giving the money to the nominee.

So, the family remains protected within the grace period. This shows how helpful the grace period for term life insurance can be during emergencies.

What is the Need for a Term Insurance Grace Period?

The Term Insurance Grace Period is important because:

• People can forget to pay premiums due to emergencies or busy schedules.
• It prevents the policy from lapsing instantly.
• It gives the policyholder a chance to revive their policy.
• It offers financial protection to the family, even when the premium is delayed .

Without the grace period, even a one-day delay could lead to loss of insurance coverage, which can impact the financial security of the family.

How Does the Grace Period Work?

Let’s take a simple example.

Mr Ravi has a yearly term plan premium of ₹25,000, due on 1st January. He forgets to pay it on time. His insurer offers a 30-day grace period for yearly payments. This means he can still pay the premium until 31st January without losing policy benefits.

If he dies on 25th January, and the premium is still unpaid, his family can still claim the sum assured, but the insurance company will deduct ₹25,000 from the claim amount.

This is how the grace period in term life insurance helps keep policies active for a little extra time.

What is the Grace Period for Different Premium Pay Modes?

The grace period in term insurance may change depending on how often you pay the premium.

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

If your grace period for term life insurance ends and you still haven’t paid the premium, your policy will lapse. At this point, you have two choices:

1. Revive the old policy
2. Buy a new term plan

Let’s compare:

If the lapse is recent, reviving your old policy is often simpler and more affordable. But if it has been a long time or revival is not allowed, buying a new policy is the only option.

What happens when the grace period for one’s term life insurance ends?

If you choose not to renew your term life insurance during the grace period, your term life plan will lapse and the policy will no longer be valid. A lapsed policy means that all your term insurance premiums that were paid so far, in addition to the coverage secured will be lost. Any claims that are raised on a policy that has lapsed are void. Some insurers do allow you to revive a lapsed policy under specific conditions, by paying certain charges. Check with your insurer for more details.

Overall, it is recommended that one should not let their term policy lapse by making timely premium payments.

Conclusion

If you think all is lost when you miss a premium payment, this is untrue. With the insurance providers, you have the option to revive an old pre-existing policy. You can opt to revive a lapsed policy, but make sure that you check the cost of revival versus simply buying a new term plan first. Based on your insurer, the terms and conditions for reviving a policy will vary.

FAQs

What is the Grace Period in Insurance?

The grace period in insurance is the additional time given to you after your premium due date to pay your premium without losing coverage.

The grace period from the due date of premium is 15 days if the premium is paid in monthly installments. Whereas the period is 30 days where premium is paid in quarterly/half-yearly/annually.

When Can a Policy Lapse in Life Insurance?

A policy lapses if you fail to pay your premium even after the grace period ends. Once lapsed, your coverage ends, and no benefits are available. A lapsed policy can sometimes be revived, but this depends on the insurer’s term and conditions.

How Does the Waiting Period Differ from the Insurance Grace Period?

• Grace Period: Time given after the premium due date to make payment without losing policy benefits.
• Waiting Period: A set time at the start of the policy during which certain claims (like suicide within the 1^st year)) are not allowed.

Can I Pay a Term Insurance Premium After the Grace Period Has Expired?

Once the grace period is over, your policy lapses. However, some insurers allow you to revive the policy by paying the outstanding premium + penalty or interest and revival charges as applicable.