• Blog
  • Calculators
  • Quiz
  • Sample Financial Plan
MoneyChai
  • Blog
  • Forum
  • Android App
  • Blog
  • Calculators
  • Quiz
  • Sample Financial Plan

Grace Period For Life Insurance Policy

By:MoneyChai Insurance Published: 29 Nov, 2017

What is the grace period for life insurance policy? What happens when you do not pay your premiums or payments on time?

Ramesh`s father was admitted to the hospital last night as  had suffered a severe heart stroke. Unfortunately, he could not survive. When Ramesh made an insurance claim, he realized that the last premium have gone unpaid and policy is now in lapsed status.

His father was paying the premium for term insurance since last 20 years. Since he was unwell for sometime, he could not pay the premium on time. As the policy was in half yearly mode, notice was also sent to pay the premium in grace period. Now the grace period was also over.

What will happen if a Policyholder dies within the Grace Period or after the grace period is over? Will the Nominee get the claim or will the claim be rejected?

grace period for life insurance policy

Definition 

Grace Period is the extra time you get to pay your premiums after the due date is over.

Definition by investopedia

Regulations

There are no written regulations about the grace period. Insurance companies give grace period as a part of good servicing to the customers.

You also get reminders from Insurance Company if your premium is due (normally in case of Quarterly, Half-Yearly and Yearly modes). For Monthly policies, most of the companies now accept ECS only.

Example of Grace period for life insurance policy

If your premium due date is 8th December, 2014 (yearly mode) and you have not paid your premium on time, you still have 30 days/1 month to pay your premium before your policy lapses.

Now what is a Policy Lapse? A Policy Lapse would mean that your Beneficiary/Nominee will not get any benefits if something happens to you.

Suppose, death of the Policyholder happens on 25th December, 2014, Beneficiary/Nominee will get the sum assured after deducting the unpaid premium for the year. If death of Policyholder happens after 30 days/1 month, Beneficiary/Nominee will not get any benefits. The claim will be rejected.

  • Grace Period of Premiums – Timeframe and Mode
  • Grace Period is different for different Modes of Time
  • Monthly payments – 15 Days
  • Quarterly payments – 30 Days/1 Month
  • Half-Yearly payments – 30 Days/1 Month
  • Yearly payments – 30 Days/1 Month

Time frame for grace period is also different for different companies. Some companies say, its 30 days and some other quote it as one month. It depends on company to company on how they calculate the 1 month period since February has 28 days and some months have 31 days too.

Grace Period in LIC

What is the grace period to Pay LIC Premium?

A grace period of 30 days will be allowed for payment of Yearly or Half-Yearly or Quarterly premiums and 15 days for Monthly (through ECS) premiums. You also get notice one month in advance to pay your due premium.

Grace Period of Payments – Term Insurance Policies

Not all companies give you a grace period of 30 days in Term Insurance policies even for a yearly mode. Some companies do provide for a grace period of 15 days in Term Insurance policy.

Death During Life Insurance Grace Period

How unpaid premiums are deducted at the time of Claim Settlement?

All the unpaid premiums for the year will be deducted while settling the claim. Suppose, there are four people who have bought Term Insurance cover of Rs. 1 Crore with different payment modes. All the policies were issued on 8th December, 2013.

Person Sum Assured Mode Premium Premium Due date
A 1 Crore Yearly Rs. 10000 8th Decmber, 2014
B 1 Crore Half-Yearly Rs. 5000 8th Decmber, 2014
C 1 Crore Quarterly Rs. 3500 8th Decmber, 2014
D 1 Crore Monthly Rs. 1000 8th Decmber, 2014
  •  “A” does not pay the premium and dies on 25th December, 2014;

Claim settlement amount would be Rs. 1 Crore – Rs. 10,000

  •  “B” pays the premium on 8th December, 2014 but forgot to pay his next premium which is due on 8th June, 2015 and he dies on 15th June, 2015;

So the Claim settlement amount would be Rs. 1 Crore – Rs. 5,000

  •  “C” pays the premium on time on 8th December, 2014 and dies on 25th December, 2014;

Therefore the Claim settlement amount would be Rs. 1 Crore – Rs. 3,500 x 3 (the 3 Quarterly due)

  •  “D” pays the premium on 8th December, 2014 but forgot to pay his next premium which is due on 8th January, 2015 and he dies on 15th January, 2015;

Hence the Claim settlement amount would be Rs. 1 Crore – Rs. 11,000

 ULIPs Grace Period

Normally, the rule is the same for ULIPs as in the case of traditional policies, but in some ULIPs, you have an option of auto cover.

Auto cover is when you stop paying the premium and still your policy is not lapsed. The company automatically deducts the amount from the fund value to cover the mortality charges. But this is not true for all ULIP investments. Also, it depends on company to company and product to product.

Some insurance companies require a written consent from the customer to deduct the mortality charges from the fund value. Also, there is a limit of paying minimum premiums like for 1 year, 2 years, 3 years or 5 years.

There is no insurance grace period after termination of policy.

So, do not wait for the reminders to pay your premiums. Pay on time, it will help you to become a disciplined investor. Please feel free to ask if you have any other question about grace period for life insurance policy.

 

2 Shares
Share2
Tweet
Share
WhatsApp

Filed Under: Insurance

MoneyChai

Hi, I am Ajay Pruthi, an alumnus of NIT Jalandhar and K.J. Somaiya Institute of Management Studies. I have over 10 years of experience in the field of insurance and have worked with top two private insurance players in the country. I am a Certified Financial Planner and currently working as a Paraplanner with Mr. Melvin Joseph, founder of Finvin Financial Planners. If you liked my blog and want to discuss further on comprehensive fee only financial planning, feel free to get in touch by visiting Finvin Financial Planners.

You May Also Like

  • Is It Wise to Mix Insurance and Investment – Never

    Is It Wise to Mix Insurance and Investment – Never

  • ICICI Pru Guaranteed Income for Tomorrow Review – 4%-5%Returns

    ICICI Pru Guaranteed Income for Tomorrow Review – 4%-5%Returns

  • LIC Bima Jyoti Review, Returns and Tax – New LIC Plan 860 Details

    LIC Bima Jyoti Review, Returns and Tax – New LIC Plan 860 Details

  • LIC Jeevan Labh Review – Why Every Blogger Ended Up Calculating Wrong Returns?

    LIC Jeevan Labh Review – Why Every Blogger Ended Up Calculating Wrong Returns?

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

  • Retirement
  • Retirement
  • PF Accumulation at Retirement
  • NPER
  • Child`s Goals
  • Higher Education
  • Marriage
  • Investments
  • HRA
  • PPF Accumulation
  • PMVVY
  • SIP
  • Lumpsum Investment
  • Fixed Deposit
  • Recurring Deposit
  • Present Value of Money
  • Future Value of Money
  • Increasing SIP calculator
  • Compound Annual Growth Rate
  • Monthly SIP Required for Any Goal
  • SCSS
  • Term Insurance
  • Life Insurance Need

Newsletter

Popular posts

  • House Rent Allowance Rules and Regulations – HRA 2020-21

  • Gratuity Formula – Rules, Limit, Eligibility & Calculation 2020

  • Gift Tax Rate in India – Limits, Exemptions and Rules 2020-21

  • NRI PPF Rules – Account and Notification 2019

  • GST Rate on Real Estate – Under Construction & Completed Property

  • Should I Surrender My Jeevan Anand Policy from LIC?

  • Cost Inflation Index Calculation for FY 2020-21 & AY 2021-22

  • Early Retirement in India -How to Retire Early like Suresh ?

  • Bank Locker Rules and Regulations – Charges & RBI Guidelines

  • Financial Advisor Fees Structure, Cost & Charges in India

Recent Posts

  • Is It Wise to Mix Insurance and Investment – Never

  • Types of Risk in Debt Mutual Funds –Interest Rate, Credit and Liquidity

  • Tax on PF Interest – New PF Rules 2021 with Example

  • Calculating Returns And Lazy You

  • Deductions under Section 80C for FY 2020-21 – Tax Benefits

  • ICICI Pru Guaranteed Income for Tomorrow Review – 4%-5%Returns

  • Deduction under Section 80D – Tax Benefits for 2020-21

  • LIC Bima Jyoti Review, Returns and Tax – New LIC Plan 860 Details

  • Should You Purchase Capital Gain Bonds from NHAI & REC to Save Tax?

  • Chemist Vs Biased Doctor Vs Unbiased Doctor

Footer

About Us

Hi,
I am Ajay Pruthi, an alumnus of NIT Jalandhar and K.J. Somaiya Institute of Management Studies. I have over 10 years of experience in the field of insurance and have worked with top two private insurance players in the country.

I am a Certified Financial Planner and currently working as a Paraplanner with Mr. Melvin Joseph, founder of Finvin Financial Planners.

If you liked my blog and want to discuss further on comprehensive fee only financial planning, feel free to get in touch by visiting Finvin Financial Planners.

 

Newsletter

Help Links

  • Contact Us
  • Write for moneychai
  • Sitemap
  • Disclaimer
  • Advertise
  • Archive

Categories

  • Banking
  • Financial Planning
  • Insurance
  • Investment
  • Mutual Funds
  • Retirement
  • Tax
  • Chai Pe Charcha
  • Blog
  • Forum
  • Android App
Copyright ©2017 MoneyChai. Designed by Mount Moriah Infotechs