What is the Coverage Period?
A coverage period is the length of time during which an insurance policy is in effect. In life insurance, if the insured dies during the coverage period, their beneficiaries will receive the policy’s death benefit.
In other words, if they pass away during the coverage period, the people they’ve picked will get a sum of money. If they die outside the coverage period, those individuals get nothing from the insurance provider.
Coverage period by policy type
There are two main types of life insurance, each with its own coverage period:
- Term life insurance. These policies will usually lapse after a set term (usually, 10 to 30 years). That means the coverage period has a predetermined end date.
- Permanent life insurance. Once in place, these policies last the insured’s lifetime. That means the coverage period doesn’t end until they pass away.
Life insurance waiting periods
The coverage period doesn’t necessarily begin the day you apply for life insurance, unless you are eligible to and pay the first premium. Otherwise you will end up waiting for several weeks while the insurance provider evaluates their risk and decides whether or not to offer you a policy.
If the insurance provider decides to insure you, you should usually be able to start your coverage period within a few weeks.
This assumes you choose and are eligible for traditional life insurance. If you’ve had trouble getting coverage, though, you might opt for guaranteed-issue life insurance.
This skips the medical exam and questionnaire but comes with a much longer waiting period. Many guaranteed-issue life insurance policies require a waiting period of 24 months. That means you’ll need to wait two years for your coverage period to begin — and if you die before it starts, your beneficiaries will only receive a refund of the premium paid from the life insurance company, often plus a small percentage, e.g., 10%.
Grace periods and policy lapses
The term and permanent life insurance coverage period end dates we outlined earlier assume you consistently pay your premiums, or the money you owe your insurance provider for the policy. If, however, you miss a payment, the grace period starts. In most cases, it lasts about a month, during which you can make up for your missed payment.
If the grace period passes, your policy will lapse. At that point, your insurance company will most likely end your coverage period.
Note: this is all true unless you have a permanent cash value insurance policy. In that case, the premiums can be covered by the built-up value inside of your policy. Should you use up that cash value, though, your policy can then lapse.