We often face some financial problems in our lives due to which we are not able to pay EMI or insurance premium on time.
Sometimes we don't even remember to pay the premium for life insurance. Whether you are paying your life insurance premium annually or every month, you are given a grace period to pay the premium.
Its grace period is decided according to the frequency of premium payment. Today we will tell you what is the grace period for premium payment of a life insurance policy and what happens when you are not able to pay the premium during the grace period.
Also Read: Why Your Health Insurance Claims Might Not Get Fully Settled?
The grace period for premium payment of a life insurance policy depends on how frequently you make the payments. If you pay your life insurance premium annually, you get a grace period of 30 days.
Whereas, if you pay the premium every month then you get a grace period of 15 days. If you pay your premium within the grace period, your policy continues to provide all the benefits without any interruption.
If you are unable to pay your life insurance premium for any reason during the grace period, your life insurance lapses.
The thing to keep in mind here is that if you have taken term insurance and do not pay its premium on time, then all the benefits of the policy are lost from your hands. You neither get the premium given nor the life cover.
In case of traditional or endowed policies, the policy lapses if the premium is not paid in time during the initial years.
However, when your policy reaches some surrender value i.e. when it can be paid-up, the policy does not lapse and continues with the reduced life insurance cover i.e. sum assured. Same thing happens in case of ULIP also.
Keep in mind that a heavy penalty is imposed on surrendering a traditional life insurance plan.
In case of Unit Linked Insurance Plans (ULIP), if you are unable to pay the premium during the first five years or even during the grace period during the lock-in period, your policy will lapse. The insurance benefits you get will be lost and you will also not get the investment amount.
The premium deposited by you is transferred to the Discontinuance Fund and can be paid only after the lock-in period of five years. If you stop paying premium after the lock-in period, you have the option to surrender the policy.
After surrendering the policy, the invested amount is returned to you after deducting some charges. You also have the option of revival or you can continue your insurance by getting the policy paid up.
