Insurance providers are humans too and understand that money can suddenly become tight, hence the insurance grace period. Regardless of premium size, insurance companies have a grace period for almost all policies.
Insurance companies also have their unique dates for the grace period. It continues beyond that; the grace period is quite a nice little way to look out for clients and not impose sanctions immediately.
So, newbies in the financial, investment, and insurance industries need to have good knowledge of what and how the grace period works.
What is an Insurance grace period?
The insurance grace period is an additional or extra time you get to pay for your premium after the agreed premium payment date has passed. That is, it is a time you get to settle your premium before the insurance company takes off your coverage.
Sometimes, the grace period from your insurance company comes with a late payment fee. So, when you finally make your premium payment, you must add the late payment to it if your insurer says so.
Furthermore, there is no universally agreed time for policyholders to pay premiums. Each company and the state decide on how long its grace period lasts.
How the insurance grace period works
Paying insurance premiums is a regular occurrence if you want to keep your coverage in good working condition. Lack of prompt payment or not paying at all negatively affects your coverage and can make you lose it completely.
Now, the insurance grace period begins after the due date of the premium payment elapses, and a policyholder is yet to pay. Instead of the policy ending abruptly, the grace period protects the coverage and allows the policyholder to make up money and pay for the premium.
The state you reside in has a rule that governs the length of an insurance grace period. These periods may be in days or stretch for months, and the policy will still be running, but insurance companies prefer to extend grace periods for a short time because it may become detrimental to them.
However, some states do not offer this grace to their policyholders; they clamp down on the coverage immediately after the premium fails to come in.
To clarify this grace period, a policyholder with health insurance usually gets a grace period of 90 days. Still, before you qualify for such a lengthy period of grace, you must have paid some months’ premium in advance.
So this means that the length of grace is different for policyholders according to the type of coverage and other factors relating to their policy.
What happens if a policyholder wants to continue their policy after cancellation?
After the grace period has expired, the insurance company will close the policy. When the policyholder decides to re-install the coverage, the insurance company will ask them to drop a sizeable down payment or require that they pay higher premiums in the future. Also, the insurance company may ask for a full insurance premium to ensure they do not risk making losses again.
Which insurance coverage has a grace period?
Many policies come with a grace period so that the policyholder will not feel overwhelmed by the constant premium payment method. Some of the coverage you can buy and get it includes
Car insurance
Homeowners Insurance
More so, the financial industry has a grace period policy. When banks or lenders loan money to their customers, they offer this period to them too before seeking a payback.
Is the grace period and waiting period the same?
In insurance, especially health insurance, there’s a waiting period and a grace period. However, these two are entirely different from each other.
The waiting period makes policyholders wait for a particular date before filing for a health or medical claim concerning a health issue.
It is different with the grace period. The grace period is your extended billing window opportunity. So while the waiting period is for filing a claim, the grace period is an opportunity to save your coverage and pay for your premium after missing your due date.
Note that some insurance companies will not permit you to re-install your coverage after you let it elapse.
An example of a grace period
Suppose a policyholder has a coverage that requires them to pay their premium every 13th of the month and a grace period of 30 days. Say the policyholder missed paying the premium on the 13th of the current month because of financial constraints, you will get a notification, and the grace period of 30 days kicks in till the 13th of the following month. If no payment were made afterward, the insurance company would close down the coverage according to their policy.
Regardless of the free window to pay your premium on a later date, it is not wise to rely on that option. Frequent usage of this period will put a policyholder on the red list of company customers, and also you may risk coverage termination. With a termination, other insurance companies will not agree to cover such a person because of the history behind the first coverage.
How to avoid overusing your grace period
It helps to be prompt and up-to-date with your policy and pays to be in your insurance company’s good books. So to avoid overusing this privilege, you may need to step up your game.
First, put on a reminder for your date if you tend to forget. A reminder that will date back to a week or a few days before your due date. That way, you make plans for the money and keep it handy.
Secondly, offer to pay in advance. Paying your premium in advance when you have the money to spare can ease the burden. Speak with your insurance provider and ask for the option to pay in advance if possible.
Conclusion
The privilege to still pay after missing your date is a way to say we all do not have it together all the time and everyone gets it. However, a rule remains a rule, and privileges should not be abused. For your insurer to serve you well and happily, keep to the policy to the best of your power.
