Grace Period
What Does Grace Period Mean?
A grace period is a specific time frame after the premium payment due date during which the policyholder can still enjoy the coverage provided by the insurance policy and make the payment without incurring a financial penalty. Payments made after the grace period typically incur a fee and/or result in a lapse in coverage. Insurance companies usually offer a grace period ranging from as little as 24 hours to as long as 30 days.
Insuranceopedia Explains Grace Period
Not all policyholders pay their premiums on time. Under normal circumstances, non-payment of a premium leads to a lapse or suspension of coverage. However, in the United States, state regulations govern insurance grace periods, specifying the duration that insurance companies must offer their policyholders across all types of policies.
Some states allow insurers to terminate coverage immediately without advance notice, while others require a specific duration. As long as the grace period is in effect, the insurance company remains responsible for the policy. For example, if a policyholder’s premium is due on September 8 and they have a one-week grace period, paying on September 12, the day after their home burns down, the insurer must cover the claim since the grace period is still active.