Definition - What does Grace Period mean?
A grace period is a particular span of time after the premium payment due date during which the policyholder can still enjoy the coverage provided by the insurance policy and pay without incuring a financial penalty. Payments made after usually incur a fee and/or a lapse in coverage. Insurance companies typically provide the policyholder with a grace period as little as 24 hours or as long as 30 days.
Insuranceopedia explains Grace Period
Not all policyholders pay their premiums on time. In normal circumstances, non-payment of a premium leads to a lapse or a suspension of coverage. However, in the United States, states manage regulations for insurance grace periods, which specify the duration that insurance companies need to offer their policyholders across all types of policies.
Some states enable insurers to cease coverage immediately without any advance notice, while others mandate a specific duration. As long as the grace period is in effect, the insurance company remains responsible for the policy. For instance, if a policyholder has a premium due date of September 8, a one-week grace period, and only pays the premium on September 12, the day after their home burns down, because the grace period is in effect, the insurer needs to pay for the claim.