What is an Insurance Policy?
An insurance policy is a legal contract between an individual and an insurance providing company. The individual pays a certain premium and in return, the insurance provider provides life coverage. Investing in a life insurance policy provides you and your loved ones with financial security. It ensures that you do not face any inconvenience in the future and can lead a safe and secure life.
We do not know when we face an unforeseen and unfortunate event, such as the breadwinner's death (or the policyholder). Our family might face financial constraint and find it difficult to continue with a hassle-free life in such a case. Investing in a life insurance policy ensures that your loved ones are provided with a lump sum amount of death benefits in case of the policyholder's untimely and unforeseen death. This ensures that our loved ones are financially secure and are able to continue with their lives even in the absence of the policyholder. Apart from financial security and death benefits, there are other benefits of investing in an insurance policy, such as tax benefits, add-on rider benefits, security of valuable assets, provision of loans, etc.
While investing in an insurance policy, we pay premiums to the insurance provider to enjoy the policy's benefits and get a lump sum amount of sum assured in case of any unforeseen and uncertain event, such as the policyholder's death. It is always recommended to pay your premiums on time to the insurance provider to ensure that you enjoy the policy's benefits without any inconvenience. There may be instances wherein the policyholder might not be able to pay the premiums on time due to certain reasons. In such cases, your insurance policy provider gives you the benefit of an insurance grace period.
Let us understand what we mean by an insurance grace period.
What is an Insurance Grace Period?
An insurance grace period is additional time offered by an insurance provider if the policyholder is unable to pay the premiums on time. The insurance grace period is offered to ensure that the insurance policy does not get lapsed in case there is a delay in the payment of premiums by the policyholder. The policyholder needs to pay the premiums on time so that he or she can claim the benefits of the policy without any hassle. Generally, insurance companies provide a grace period of 30 days. However, it may change from company to company.
Why is it Important to Pay Your Premiums on Time?
For every policyholder, it is essential to pay the premiums on time. However, there are various disadvantages of not paying the premiums, even after the insurance grace period is provided by the insurance company. Let us see a few of why it is essential to pay your premiums on time.
1. Loss of Assured Cover Provided to the Policyholder
In case the policyholder is unable to pay the premiums even after the insurance+ grace period is provided, it will result in lapsation of the insurance policy. As a result, the policyholder will face a loss of the assured sum or cover that was to be provided to him by the insurance provider.
2. Renewal Cost is High
In case of the inability of the policyholder to pay the premiums on time, it results in lapsation of the insurance policy. If the policyholder wants to get his or her insurance policy renewed, he or she may have to pay a penalty. To avoid such situations and enjoy the policy's benefits without any hassle, it is recommended to pay your insurance premiums on time.
3. Loss of Coverage for Pre-Existing Illnesses
We do not know when we might get diagnosed with a critical illness such as cancer, lung problems, heart attack, etc. In such cases, insurance policies with add on critical health rider benefits ensure that we do not face any financial hassle and can focus on our recovery with peace of mind. In case wherein the policyholder fails to pay the premiums on time or in an insurance grace period, the waiting period to get critical health rider benefits gets lapsed. Moreover, the policyholder might have to wait again for the waiting period to avail of the benefits. Therefore, it is recommended to pay your insurance premiums on time or in an insurance grace period.
4. Hassle at a Later Age
When we are young, healthy and earning, it is easier to invest in an insurance policy and pay the premiums on time. However, in case the policyholder fails to pay the premiums to the insurance provider, it leads to lapsation of the policy. This might create a hassle and inconvenience for the policyholder to invest in a new insurance policy at a later stage. This is because the premiums that we pay for the policy are expensive later than when we pay it at a younger age. To ensure that our loved ones or we face no hassle at a later stage, we should pay the insurance premiums on time.
The insurance grace period is extra time provided by the insurance providing company if the policyholder is unable to pay the premiums on time. This ensures that the insurance policy does not get lapsed and the policyholder gets to enjoy the insurance policy's benefits.