What is Grace Period in Health Insurance?

Have you ever missed paying your health insurance premium by the due date, but before you panicked over a policy lapse, your insurer allowed you to make the payment while your coverage was intact? Thanks to the grace period in health insurance! Insurers will allow you some extra time to make the premium payment even after the due date.

So what is a grace period in health insurance? Let's understand how it works, what’s covered, and what isn’t, so you don’t lose your hard-earned benefits.

What is a Health Insurance Grace Period?

We will take an example! Say your premium was due on 30th January, but you forgot to pay until a week had passed. On 6th February, you casually scroll through the messages when you see a missed SMS alert for health insurance premium payment. Now you dreadfully call your insurer for help, hoping that they don’t cancel your policy. But you heaved a sigh of relief when they said there’s a 30-day grace period, and you made the payment.
But had you paid after those extra 30 days, you would’ve lost your old policy benefits completely.

A health insurance grace period is a short window that can save your coverage even after you miss the payment date. Insurance companies consider the fact that people may miss the due date and, therefore, provide an additional time.

During the grace period, you can pay your premiums without losing the policy benefits or having the policy cancelled. This is mandated by the IRDAI (Insurance Regulatory and Development Authority of India).

However, you must bear in mind that this is only a temporary relief. If you miss the health insurance premium payment during the grace period, your insurer may cancel your policy. If your health insurance lapses, you will lose all its benefits.

Also Read: How to Port Your Health Insurance Policy to Another Insurer?

IRDAI Grace Period Rules

The grace period may vary from 15 days to 30 days. As per the IRDAI grace period rules, insurers must give a minimum grace period of 15 days for the monthly premium payments, and of 30 days for quarterly, bi-annually or annual payments. The insurance companies cannot cancel the policy suddenly after the due date lapses.

They must also not levy fines or additional charges for late payments during the grace period.

Grace Period Vs Waiting Period

Policyholders often confuse the two terms. The meaning of a grace period in insurance is the extra time given after the premium due date to pay and retain your policy. On the other hand, the waiting period refers to the time you must wait after buying a new policy before certain conditions are covered.

Simply put, a grace period keeps your existing policy alive, while a waiting period applies when you start a new policy. Also, a grace period applies to all health insurance policies (and even other types of insurance), whereas a waiting period does not.

Why is the Grace Period Important?

Life happens, and we often miss the most important dates, payments, etc. You may have an approaching due date for your health insurance premium payment, but you have been occupied with work, business, family, travel, legal matters, and so on. The date may slip by, and you shall panic the next morning that you missed the premium.

In such unfortunate cases, the grace period saves you. It is important because - 

• You can make the payment and continue your policy, keeping the coverage and other benefits intact.
• In case of renewability, you need not reapply if you make the payment by the due date or during the grace period. After the end of the health insurance grace period, insurers may not renew the existing policy.
• Renewability allows you to earn No Claim Bonus (NCB) from the past year’s policy, where you made no claim. Hence, you may get discounts on the premium.
• Many diseases have a waiting period in the health insurance policy. When you renew the policy, the waiting period is carried forward. 
  In short, a grace period is an additional time to your health insurance renewal period. Missing the payment during the grace period is like starting from scratch. Even if the insurer allows you to pay the premium and renew the policy, high chance is there that you will have to pay penalties.

What Happens If You Miss Paying the Premium During the Grace Period?

In most cases, your policy automatically lapses if you don’t pay your premium before the grace period ends. Some insurers may not allow policy renewal after the grace period, while some may allow but fine you.

Some common consequences are -

• If you missed paying the premium during the health insurance grace period, your policy will not continue, and therefore, you have no coverage or claim eligibility.
• Once the policy ends or is discontinued, the accumulated bonuses will be forfeited. You may have to pay higher premiums, as you will not get any discount or bonus from the insurer when you repurchase the health insurance policy.
• There is a reset of waiting periods. When you reapply, the waiting period begins again, unlike when you renew the policy.
• The reapplication process can be a hectic one. The insurers may ask you to undergo medical screenings for a new policy. Hence, it may require fresh medical tests and reassessments of health conditions. This can be avoided if you make timely payments to renew the existing policy instead of its lapse due to late or failed payments.

Summing Up

The term ‘grace period’ indicates the idea of showing ‘grace’ or ‘mercy’ to the policyholders when insurers do not cancel the policy right away when the due date is gone. They extend the time for paying the premium that you missed on the previous deadline. They also do not levy extra charges if payment is made during this time frame. So, to reap the benefits of health insurance, you must make timely premium payments. It is better to pay by the due date, and if you miss it, ensure you pay within the health insurance grace period.