The exact number of days under grace period varies for different insurers. Therefore, before purchasing, you must carefully go through your policy contract.
Grace Period for Term Insurance Premium Payment - Meaning & Working
Although a regular payment option for a life insurance plan is much more economical than a single-time payment, paying them regularly within the due time may be a hassle.
Moreover, you can find yourself in an unexpected financial crutch, preventing you from paying the premiums before the expiry date. Therefore, insurance providers offer a grace period that buys you time to pay off your premium without a renewal penalty. Please keep reading to understand why the grace period for term insurance premium payment is essential.
What Is the Grace Period for Term Insurance Plan?
Simply put, a grace period for term insurance is where an insurance company gives you a few additional days to pay your life insurance premium and renew your policy. This additional period varies based on the premium payment method you choose.
The majority of Indian insurance companies accept two payment methods for premiums. First, in a single-premium plan, you pay your premiums in a lump sum at the time of purchase. The second option is the Regular Premium, where you can pay your premium monthly, quarterly, bi-annually, or annually.
As per the IRDAI guidelines, the frequency of your premium payments will determine the number of days you will get as a grace period.
Given below is a table showing the approximate grace period for payment method of your policy premiums:
|Frequency of Premium Payments
|Grace Period in Days
|Death Benefit Payout Options
|Lump Sum or Regular Income Based on Various Factors
|Renewal Rate Guarantee
|Available as an Add-On
Disclaimer: Note that these are generic numbers that give you an approximate idea about the grace period. However, the actual number of days for each category may vary for different companies. Therefore, you must check with your insurer while purchasing to avoid defaulting or a penalty.
What Happens After Grace Period for Term Insurance is Over?
What Happens if the Insured Passes Away During the Grace Period of Term insurance?
In case of an unfortunate event, if the life insured passes away before making the premium payment within the grace time, exceptions are made by the insurance company.
Generally, in such a situation, your family will be entitled to the death benefit according to the terms and conditions of the policy. However, the unpaid amount of premium will be subtracted by your insurer from the sum assured.
Should You Restore the Lapsed Term Insurance Plan or Purchase a New One?
Almost all insurance companies in India entitle their policyholders to restore a lapsed term plan within two years after the term insurance grace period has expired. However, each insurer may have a different policy regarding the terms of revival.
In addition, for the policy to be revived, you will also need to pay additional money in the form of interest costs, penalties, revival fees, etc. A medical exam may also be required by some insurers, and you will be responsible for the costs.
Therefore, whether you should revive the lapsed plan or simply buy a new one will depend on the cost-effectiveness. Before deciding, you should weigh out the costs for both and see if a new policy has a better offer than the previous one.
The Grace period for term insurance premium payment is an essential window that lets you safeguard your policy in case you are unable to pay a premium on time due to financial constraints. Therefore, this period should be utilised effectively.
FAQs about Grace Period for Term Insurance Premium Payment
No. The grace period is offered after the due date as an additional time. Therefore, if you fail to make payments within this period, your policy will lapse, and you will lose the premiums paid earlier.
No. The waiting period refers to the period after buying a policy only after which you can make a claim on the policy. On the other hand, grace period refers to the additional time after the due date that insurers allow you to pay the outstanding premium.
Yes, you can pay your premiums beforehand. It saves your policy from lapsing and brings peace of mind. However, to know the exact process, you must ask your insurance provider.
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- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.