Days of Grace
Definition - What does Days of Grace mean?
Days of grace, in the context of insurance, refer to the set period after the due date of a premium payment during which a policyholder can pay without facing a lapse in coverage. During this time, the policy remains in force, but the policyholder may still faces a penalty charge for making a late payment.
Insuranceopedia explains Days of Grace
Typically, for standard coverage, insurance companies provide policyholders with approximately a 30-day grace period. It protects policyholders for coverage lapses in cases they cannot pay on time or forget to do so. States regulate laws concerning grace periods, such as the length across various policies and whether insurers may terminate coverage immediately without notice after a late premium payment.
During the grace period, the insurance company is still responsible to uphold their end of the insurance contract; thus, insurers would prefer as short of grace periods as possible so as to avoid situations in which they must satisfy a claim although not yet having received a payment.