What is an insurance policy grace period?
What is an Insurance Grace Period?
“I'm going to Graceland, Graceland, Memphis, Tennessee.” Yes, Paul Simon may have been singing about Elvis’ private retreat, but maybe he just needed a day or two of rest — a grace period, if you will.
“What’s that?” you ask. “What is a grace period?” Well, dear reader, a grace period is the extra bit of time you’re given to pay money without incurring additional fees. In the world of insurance, it refers to the amount of time after your premium payments are due but before your insurer cancels your policy. How long it lasts, however, depends on a few factors, including your provider, the type of policy you have, and the state where you live.
A grace period can be as long as 90 days and as short as 24 hours. Some policies might not offer a grace period, whereas others might be quite extensive. This will all be stipulated in your policy contract.
Why Are Grace Periods Important?
Grace periods exist to prevent policyholders from losing full coverage if they are late with their payments. Most finance services — including student loans and credit cards, for example — come with a grace period. You could say that a grace period offers an extension of sorts: this way, the policyholder avoids a coverage lapse and can still file claims if need be.
Understandably, insurance companies like shorter grace periods. That way they can avoid having to cover damages absent premium payments. That being said, many carriers do offer a grace period, and it provides the following advantages:
More time to make payments
The grace period gives you a bit of leeway in paying the outstanding bills after the due date, and generally helps debtors avoid bad credit.
You won’t accrue interest during a grace period, so you only have to pay your monthly premium, as expected. That being said, keep in mind that some companies might have late fees.
Even if you fail to pay your insurance premium on time, you can’t be blacklisted from a company if you make use of the grace period.
While it’s useful to understand the advantages a grace period offers, it’s generally best to manage your finances so that you avoid such situations. Keep track of your payment due dates (which is easy to do when you add your policies to Marble!) and follow up if something seems amiss with your bills.
How Does the Grace Period Work?
As we covered above, the insurance grace period allows the policyholder to keep their insurance coverage for a certain period of time, even if they don’t make premium payment by the due date.
And during the grace period, the insurer is still required to pay the policyholder for insurance claims. For that reason, insurance companies often lean toward a shorter grace period to avoid a situation where they have to cover damages without having received premium payments.
But make note: If the policyholder (aka you, in this case) fails to pay by the end of the grace period, the policy will be canceled. If your policy is canceled owing to non-payment of premiums, there’s unfortunately very little that can be done to reactivate the coverage. You’ll probably have to buy a new policy and re-apply, which can be a real headache, seeing as your insurance score likely would have dropped after the cancellation.
Does Every Policy Come With a Grace Period?
Typically not! Because a grace period isn’t legally required, it’s up to the insurance provider to decide whether to offer one or not. Types of insurance policies that may come with grace periods include:
- Life insurance
- Car insurance
- Home insurance
- Health insurance
So this is a good reminder to read your policy contract carefully. The contract will clearly cover how many days of grace period you get to pay your premiums without the policy being canceled.
How Long Does a Grace Period Last?
Each plan may have a different grace period — even those offered by the same insurance provider. A grace period could last anywhere between one day and 90 days, and depends on the type of insurance you purchase, the insurance policy, and the state you live in. Remember that most insurance companies are likely to keep their grace period as short as possible, since they’re still on the hook to cover your claims during that time.
Depending on the insurance company, your policy may also have two grace periods. The first grace period is usually shorter and doesn’t involve a late payment fee. The subsequent grace period may be longer and entail a late fee.
Having a firm handle on the length of your insurance plan’s grace period will help you avoid paying penalties or having your insurance lapse. That’s why we recommend using an online tool like Marble for managing all your insurance policies and keeping track of payment due dates.
Monitor All Things Insurance with Marble
Keeping track of all your premiums can be a headache, but it’s better than the alternative! Fortunately, Marble can help. Sign up today to keep all your payment due dates organized and get notifications when your policy is set to expire.
And if your insurance policy has lapsed, Marble can help you find new coverage. Browse and compare insurance plans to find the one that works best for you — all while earning rewards on your insurance. Sign up today!