What Is an Insurance Grace Period?
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Sometimes life gets in the way and you forget things. Most of the time, it is something minor like forgetting to take the trash out or picking up milk on the way home. But on occasion, it can be something more important like paying the bills. If one of those bills happens to be your insurance premium, it may give you peace of mind to know that you can take advantage of an insurance grace period.
What Is an Insurance Grace Period?
Maybe you forgot to pay your insurance bill or it got lost in the mail. Next thing you know, you’re in a fender bender and just rear-ended the car in front of you. Luckily, most insurance companies offer an insurance grace period. This is the amount of time after your payment due date during which you can still pay your premium and not lose your coverage.
How Long Is an Insurance Grace Period?
Insurance grace periods differ among insurers and coverage types. They can be as short as one day and as long as 30 days. It also depends on the state you live in, as some states have laws protecting consumers from lapses in insurance coverage.
It is common to pay late fees if you do not make your payment on time, even if it is within the grace period. This is the cost of being late. You don’t want to take advantage of your grace period repeatedly; if you are continually making late payments, you risk the chance of your insurance premiums increasing.
Is an Insurance Grace Period Guaranteed?
An insurance grade period is not guaranteed. In fact, some states don’t require one so your insurance can lapse at the stroke of midnight after the day your payment is due. Fortunately, several insurance companies offer it as a benefit to stay competitive.
Even so, if you abuse this perk and your insurance company can prove it, you may be denied coverage if a payment has not been received and an accident or loss occurs. This is why it is vital to make your premium payments on time as often as you can. Also, if your insurance lapses, it may be difficult to get it reinstated, or you may have to pay higher premiums.
Why Is Continuous Coverage Important?
In some cases, it is important to have continuous and uninterrupted coverage. This is often the case in error and omissions (E&O) policies, which are a form of professional liability insurance. For example, if you are a realtor and you sell a house and it is later discovered that there was an error in the contract, your E&O insurance will cover you during the retroactive time period. However, if you let the policy under which the contract was written expire, your new policy will not cover that transaction and you will have lost any protection you might have had.
How Do I Protect Myself from Loss of Coverage Due to Late Payments?
Only use your insurance grace period when you absolutely need to, and do not make a habit out of sending your payment in late. This will only lead to higher premiums and an eventual loss of coverage.
A good method of preventing this from happening is setting up automatic payments. This allows your insurance provider to get your payments on time and prevents a lapse in coverage. If you don’t want to set up automatic payments, keep a calendar reminder so you know when to pay online or mail a payment. Keep track of when your insurance is renewed so you are never without protection.
An insurance grace period can be an important benefit. However, bear in mind that it is not offered for all insurance policies and coverage types. Reach out to your insurance company to get a clear understanding of what your insurance grace period entails and what happens if you pay late.