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A term insurance policy enables you to safeguard your family’s financial future. The plan functions like any insurance policy – you pay regular premiums for a stipulated time. If something occurs to you during the policy's term, your beneficiary receives the sum assured as an insurance payout. Although you may have a budget that allows you to make your term insurance premium payments on time, an emergency may force you to rethink your finances. At such time, you might have to divert the money saved up for your premium to other avenues. Thankfully, the IRDAI provides a grace period during which you can pay your outstanding premium and continue to enjoy policy benefits. Let’s understand what the grace period in term insurance means.
A grace period refers to a time that starts directly after the due date of your premium. You can pay your outstanding premium amount during this time without losing your insurance benefits. Let’s look at an example. Say you pay a quarterly premium of INR 8,000 for a term insurance policy. Your payments are due on 1st April, 1st July, 1st October and 1st January. You meet with an accident and require urgent medical attention in December, leaving you unable to pay the premium on or before 1st January. Your insurance company offers a 30-day grace period for quarterly payments. So, you can make the final payment of INR 8,000 before 30th January without losing your life insurance coverage.
Here’s a look at the typical grace period you can expect depending on how you choose to pay your premiums:
Yes, your family is eligible to receive the life insurance payout during the grace period. Once your family raises a valid claim, the insurer will settle the payment after deducting the pending premium amount.
If you miss making your premium payment during the grace period, your insurance company will cancel your policy. Once the policy gets cancelled, you no longer enjoy life coverage, leaving your family without financial protection. If the policy lapses, you will lose out on all premiums paid so far. Additionally, you will not get any returns, even if you have purchased a policy that offers a return of premiums as the maturity benefit.
As a responsible individual, we’re sure you’d like to rectify the situation and restart your term plan. Most insurance companies allow you to revive your policy for up to two years from the end of the grace period. Say your grace period ended on 30th January 2021. You have until 20th January 2023 to revive the policy. However, the insurer may charge penalty fees or interest charges before restarting the policy. Depending on your age and the time lapsed; you may also have to pay for a medical check-up before your insurance company agrees to revive the policy. If two years have elapsed since the end of your grace period, you have no choice but to purchase a new term insurance plan.
Choosing between renewing a current insurance and acquiring a new plan might be difficult. You should contact your insurer to determine the cost of reinstating your previous coverage. You could consider purchasing a new policy if the costs greatly outweigh premiums already paid and future benefits.
Having a term policy provides you with peace of mind. You can rest assured that your family’s finances will remain secure even if something unfortunate happens to you. Given the value a term plan could add to your family’s finances, you must be thorough before you purchase a policy. Find a plan that fits your wallet and choose riders to enhance your coverage. Remember to pay your premiums on time to avoid your policy lapsing. Whenever possible, opt for a single lump-sum payment to avoid missing due dates in the future.
We help you to make informed insurance decisions for a lifetime.