Learn What is Grace Period in Term Insurance

Ever thought about securing your family's future if you're not there? Term life insurance does just that. But missing premium payments could cancel your coverage. That's where the 'grace period' comes in. Let's explore what is grace period.

What is Grace Period?

Term insurance grace period refers to the maximum number of days permitted by the insurer to pay the renewal premium of the life insurance coverage. The grace period for term insurance varies depending on the type of premium payment method chosen by the policyholder at the time of insurance purchase. Typically, there are two ways in which one can pay insurance premiums for their term plan:

• Single premium payment is when you make a one-time payment to the insurance provider for their term insurance plan.
• Regular premium payment is when you make regular payments (monthly, quarterly, half-yearly, or annually).

Policyholders who have chosen to make annual payments towards their term insurance are entitled to a 30 days grace period in term insurance. On the other hand, if an individual has chosen to make monthly payments of their insurance premiums, then their term insurance grace period is 15 days.

The following table explains what is the grace period that is offered, depending on the frequency of the premium payment:

Why is there Grace Period in Term Insurance?

Several individuals who hold a term insurance policy often find it challenging to renew their plan on or before the expiration date of the cover. To assist the policyholder to keep their plan active and avoid paying penalties, insurance providers introduced the term insurance grace period.

According to the Insurance Regulatory and Development Authority (IRDAI), the grace period for term insurance premium payment is 30 days. If the policyholder were to make the payment of the premium during this grace period for term insurance, their term insurance is renewed.

The guidelines issued by the IRDAI state that the grace period for term insurance premium payment would vary depending on the term of the premium payment, which could be monthly, quarterly, half-yearly, or yearly.

What Happens If You Fail to Pay the Premium During the Grace Period in Term Insurance?

The grace period for term insurance premium payment is your last chance to revive your term plan. Once this time lapses, the insurance provider will terminate your insurance policy. This would mean that the individual and the beneficiaries are no longer secured under the life insurance plan. When you miss the premium payment during the grace period for term insurance, not only do you lose the insurance security but also the previous premiums that you paid.

However, in the event of an unfortunate death, if the policyholder is in the middle of their grace period for term insurance, then their loved ones are eligible to receive the death benefit based on the terms and conditions of the policy.

What Should You Do if the Grace Period in Term Insurance Has Lapsed?

If the grace period for term insurance premium payment has lapsed, there are two options: revive the term plan or purchase a new term insurance. If you are considering reactivating the policy, you will need to follow the insurance company's rules.

If your term plan lapsed and you are looking to revive it after, say, 15 years, your premium could be higher. Sometimes, insurance providers offer discounts for revival, so it's worth checking out the benefits.

Ideally, an individual must take care not to let their policy lapse.

Things to Remember About the Grace Period in Term Insurance

• The insurance provider can cancel the death benefit if the policyholder has missed the payment of premiums beyond the term insurance grace period.
• The policyholder loses advantages such as the no-claim bonus if the grace period for term insurance lapses.
• Every insurance provider offers a grace period for term insurance premium payment, but it is important to check the grace period to ensure your policy does not lapse.

Conclusion

Now that we know what grace period is and what are the concerns of missing the payment during this term, it is important to be mindful of the premium payment and ensure that the policy does not lapse. If the policy is cancelled by the insurance provider, you and your loved ones are no longer protected financially against unpleasant contingencies.

So, if you do not have term insurance already, check out PNB MetLife’s insurance plans .