What is a Grace Period?
The grace period is the period following the due date during which a payment is permitted without penalty. In life insurance, a grace period is the amount of time you have after you miss a premium payment to make up that payment. If you don’t pay what you owe before the grace period ends, your policy will lapse. For most life insurance policies, the grace period lasts 30 days.
Missing a life insurance payment
In order to keep your life insurance policy active, you need to continually pay your premiums. The premiums are the amount the insurance company charges you in exchange for your insurance coverage. Most life insurance policy premiums are due on a monthly, quarterly, biannual, or yearly basis.
While they set a strict payment schedule for your premiums, life insurance companies understand that you might come up against unexpected circumstances. To allow you to keep coverage in place even if you miss a payment, they won’t simply cancel your policy the day after you fail to send in your premium. In fact, most states have laws that explicitly prevent that. Instead, you enter a grace period.
Again, most life insurance policies come with a grace period of about a month, but the exact length of the grace period varies. Review your policy details to understand how long you have after a missed payment before your coverage will be cancelled.
What happens during the grace period
The day you miss a premium payment, the clock starts ticking. During the grace period, your coverage still applies. That means that if you pass away during the grace period, the life insurance company is still obligated to pay the death benefit out to your beneficiaries.
That said, if you want to maintain coverage, you need to send in your premium payment before the grace period expires. If you don’t, your policy will lapse. That means you’ll be left without life insurance. At that point, you may be able to reinstate your policy, but you’ll need to apply for reinstatement and make up all of your missed payments.