Personal Finance

Take advantage of grace period

K Venkatasubramanian | Updated on March 12, 2018

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What happens when you miss paying premiums, whether by accident or by design



Among the many time-bound payments that you make, insurance premiums must surely top your priority list. But vigilant as you may be, you may forget the due date for your insurance policy bouquet — life, motor or health. What then?

Here are some key factors that you must be aware of, so that the insurance companies continue offering cover.

Grace period

The grace period is a time offered by insurance companies after the due date for your policy renewal expires. Now, this grace period works differently for life and general insurance policies.

You must be aware of this timeframe and try to pay up within the time, so that you are not denied cover or face large financial liabilities in the case of a motor accident.

Normally, most life insurance companies give a grace period of 15 days beyond your premium due date in case of monthly or quarterly payments and 30 days when you pay annually or semi-annually.

Settlement after death

But imagine a scenario where a policyholder who pays premiums regularly, skips a payment and unfortunately, dies during the grace period. Well, there is still scope for the nominee to receive the proceeds.

Normally, insurance companies check if the minimum number of payments has been made in the case of traditional policies, before settling claims.

In the case of a term cover, when the policyholder dies during the grace period, the nominee would receive the sum assured after deducting the premium amount that was due.

So, it is not as if skipping the insurance premium means that the insurance company would not make any payment, as seen in this case.



However, in the case of vehicle insurance covering your car or two-wheeler, there is no concept of grace period. So, your policy expires immediately after the premium due date.

Therefore, if you have missed the premium payment, rush to renew it. This can be done by taking your vehicle physically to the insurance office.

In case there is an accident claim after your policy expires and before you renew it, it will not be settled by the insurance firm. In any case, driving without insurance is an offence.

Also, if there is an accident, causing injuries or, worse, someone’s death while you drive without renewing your policy, you will have to face unlimited financial liability. Such an event can almost completely wreck your finances.

Note that the no-claim bonus will expire within three months of policy expiry. So, if you renew your policy later, you would stand to lose out on that count too.

Leniency for health

Health insurance companies do offer a grace period of around 15-30 days. But the cover would cease immediately after the due date. No claims would be entertained by the insurance company if you were to fall sick before renewal of the policy during the grace period. The grace in health policies comes from conditions surrounding pre-existing illnesses being brought under cover.

So, if you delay your renewal inordinately by several months (generally six), the insurance company can ask for evidence of your being in good health. You may also have to wait for more than the stipulated time for pre-existing illnesses.

The best course of action is to always pay all insurance premiums on time.

To minimise the risk of your accidentally forgetting payments, shift all your policies online and set up ECS mandates on premium payments.

Published on January 04, 2015

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