What is the grace period on my life insurance policy?

January 5, 2022

Whether you forgot to submit the payment or just need some extra time, a life insurance grace period helps you keep your policy in case you miss a premium payment.

Unless you’ve found yourself in this situation before, you might be panicking about losing your coverage. Fortunately, most life insurance policies have a grace period before your coverage lapses. If you’re asking,“what is a life insurance grace period?” right about now, review this guide to grace periods and how to keep your coverage active.

What is a life Insurance grace period and how does it impact your benefits?

If you’re unfamiliar with grace periods, they are generally considered an amount of time after a due date in which you are not considered “late.”

Life insurance grace periods

A life insurance grace period is specific to people who purchase most life insurance policies. While your grace period might vary depending on where you live, the insurance company, and the type of policy you have, there are common standards for grace period timeframes.

In most cases, you’ll have about a month — 30 to 31 days — to make a payment you’ve missed. Even if your coverage doesn’t lapse, your insurance company might add late fees after a certain point. You should stay in contact with your insurance company if you’vemissed a payment or know you’re going to be late.

Lapses in life insurance policies

While you might not have a choice — or simply didn’t realize it was happening — going beyond the grace period can result in a lapse in coverage. This means your beneficiaries won’t receive a death benefit if something happens to you while you’re behind on payments.

Your insurance company will generally notify you when you are past due and again when you are at risk of your coverage lapsing. You should also receive a notification when your coverage lapses, as well as information on whether you can reinstate the policy. You want to avoid a lapse in coverage at all costs:

  • If you lapse on your life insurance, you cannot

Impacts on Life Insurance Benefits

Lapsing on your life insurance can have serious financial consequences. First, you’re not entitled to your death benefit if your policy has lapsed. Next, any accumulated cash value on your life insurance policy will be applied to your premiums, so you’ll start to lose it. You might also have a hard time qualifying for another life insurance policy because of the lapse. Additionally, you’ll likely have to undergo another medical exam, and since you're definitely older than you were when you bought the policy, your premiums will likely be much higher than they were when you missed the payment in the first place.

In addition, you cannot sell a life insurance policy if you are behind on a payment. (But if you're in grace period while you're evaluating your options, you should let your broker or provider know about it, and they may be able to help.

Do all life insurance policies have a grace period?

Though your specific policy might have different stipulations, most insurance agents want you to keep your coverage because it benefits them, so they usually give you 30 to 31 days. In some cases, the state you live in might dictate how long you have to make a payment on your life insurance policy.

While you are in the grace period, your beneficiaries will still receive your death benefit. Your insurance company might have the authorization to deduct the premium payment from your benefit, so it’s important to keep up with that to avoid any benefit loss to your loved ones.

How to avoid a lapse in your life insurance policy

Maybe the first question is: are you intending to lapse on your insurance policy? Over half of people over 65 do. Usually it's because the policy isn't needed anymore, and they don't realize that they have an accumulated cash value.

If that's the case, you may have more options than to let the policy lapse.

Otherwise, there are ways you can avoid putting yourself in a situation where you might lose your coverage.

To keep your financial investment secure and prevent any potential problems for your beneficiaries, use these tips to avoid a lapse in coverage:

  • Add your due date to a calendar: You can use a desk or wall calendar, a calendar on your desktop, or a mobile calendar on your phone. Add your due date and set a reminder so you won’t forget to make your payment.
  • Set up autopay with your insurance company: Autopay is one of the most convenient ways to avoid missing a payment. You can set this up with your insurance company in most cases. Depending on the insurance company, you might have a couple or several payment options.
  • Schedule a draft with your bank: If you aren’t comfortable scheduling autopay online or if your insurance company doesn’t offer it, you can schedule a bank draft. This will debit your bank account and the bank will send a check to your insurance company for your premiums.

Before you miss a payment, check with your insurance company to see what your grace period is and how long you have before they assess a late fee.

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Worthright was founded with a simple goal: to help families plan and pay for the care of their loved ones. However, that goal is everything but simple to achieve.

For many families, the topic of wealth management is extremely foreign - something reserved for anyone but themselves. As such, Worthright endeavored to support the 50 million families who are financially responsible for an older adult by taking the guesswork out of senior care finances.

By empowering families to organize their financials, evaluate payment options and financially contribute to a loved one's care, we sought to reduce the stress a family felt, and return attention back to what mattered.

Sadly, after working with over 50 care agencies and hundreds of families, we were unable to find a model to sustain the business. As a result, Worthright has ceased operations. Thank you to our customers, partners, investors and families who believed in our vision for a better future.

Aaron, Christian & the team at Worthright