Life Insurance Payments and Grace Periods

With any insurance policy, you are offered a grace period – typically 30 days after the payment due date – to pay your monthly premium. This prevents your policy from ending for non-payment in the event you overlook the payment’s due date, you have an unexpected financial issue right as the payment comes due, or even if your on-time payment doesn’t make it to your insurance provider for some reason and you need to write a second check.

Since life insurance comes in two distinct types, term life insurance and permanent life insurance, what happens after that grace period expires can be different depending on what type of life insurance policy you carry.

Term life insurance

Once your grace period expires the result is your term life insurance coverage simply expires and your policy is cancelled.

Permanent life insurance

Permanent life insurance provides a few options if you fail to make your premium payment before the grace period expires. If you do nothing the policy will lapse, but you most likely have the option to reinstate the policy within five years of its lapsing. You can also cash out the policy and collect the built up cash savings. A final choice is one of the non-forfeiture options. With this choice you might be able to initiate a “reduced paid-up” option where you stop paying premiums with no cash savings and a reduced death benefit. Another possibility is turn the cash savings into a term life insurance policy.

The best way to buy life insurance – term or permanent – is to start the process by doing background research on your life insurance options and then find a source to begin comparing life insurance quotes.

Did You Know? Some insurance providers offer grace periods of 31 days, or even longer.

Takeaways:

1. Typically insurance providers provide a grace period of 30 days after the due date to pay your monthly premium.
2. At the end of the grace period a term life insurance policy expires.
3. Permanent life insurance policies offer several options in the event the grace period expires before the premium is paid.

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