Definition
Grace Period
The grace period is the extra time after a premium due date during which the policyholder can pay without the policy lapsing and while cover continues.
For life insurance in India, the grace period is typically 15 days for monthly-mode premiums and 30 days for other modes. During the grace period the policy remains in force, so a claim arising in this window is still payable (subject to deduction of the unpaid premium).
If the premium is not paid by the end of the grace period, the policy either lapses (if no value acquired) or becomes paid-up. In health insurance, the grace period also matters for preserving continuity benefits like waiting-period credits, so paying within grace avoids losing accrued tenure.
Related terms
- Waiting PeriodA waiting period is the time after a health policy starts during which claims for specified conditions or treatments are not payable.
- Policy LapseA policy lapses when the holder fails to pay a due premium within the grace period before the policy has acquired any surrender value, terminating the cover.
- Premium ModePremium mode is the frequency at which policy premiums are paid, such as annual, half-yearly, quarterly or monthly.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.