Grace Period

Most insurance contracts include a clause stipulating a grace period which refers most often to a period of time during which an insured can make good on a defaulted premium. That is, if the insured misses a premium for whatever reason, he or she has a grace period to pay that missed premium before the insurance company will cancel the policy. This period differs from one insurer to the next and from one policy to another. Generally, long-term policies like life insurance and disability cover have longer grace periods especially if these are whole life policies.

Sometimes the insurance company will require the insured to pay a penalty as well as the premium. The value of the penalty changes from insurance company to insurance company as well.

If an insured is aware that he or she is going to miss premiums, he or she should contact the broker or insurance company to organize a premium payment plan so as not to cancel the policy.