Grace Period in Life Insurance
15 days for monthly premiums, 30 days for the rest. Your cover continues meanwhile.
The grace period is the extra time an insurer gives after the premium due date to pay the premium, without any penalty or late fee. During that time the policy stays fully in force.
For life insurance, IRDAI's 2024 rules fix it at 15 days when premium is paid monthly and 30 days for every other mode: quarterly, half-yearly or yearly. Single premium policies have no grace period because there is no later premium.
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Cover during the grace period
Illustration only. Meena pays ₹2,500 a month, due on the 10th. Her March premium is due on 10 March and she has 15 days of grace. If she dies on 18 March before paying, the policy is treated as in force and the claim is payable as per the policy terms. IRDAI's master circular says risk cover continues without interruption during grace.
Paid-up value: a worked example
Illustration only. Imran has a 20-year non-linked policy with a sum assured on maturity of ₹8 lakh and premiums payable for all 20 years. He stops after paying 6 years.
- 1
Ratio of premiums paid
6 years paid out of 20 payable = 6/20.
- 2
Paid-up sum assured
6/20 × ₹8 lakh = at least ₹2.4 lakh, before bonuses or guaranteed additions already attached.
- 3
What he gets and when
The reduced amount is paid on maturity, or on death before that. He can still revive the full policy within the revival period.
- 4
Very small policies
If the paid-up sum assured is under ₹2,500 (non-micro policies), the insurer may end the policy after the revival period by paying the surrender value.
Revival: getting the full cover back
- check_circleRevival period: five years from the first unpaid premium for non-linked policies, three years for linked policies (ULIPs).
- check_circleTo revive, pay all premiums due plus any charges or late fee the policy states.
- check_circleThe insurer may ask for health evidence and decides under its Board-approved underwriting policy. Revival is not automatic.
- check_circleFor a ULIP, the insurer must tell the policyholder the policy status within three months of the first unpaid premium.
- check_circleRevival restarts two clocks: the three-year period after which a policy cannot be contested is counted from the latest of issue, risk start, revival or rider date, and the 12-month suicide clause also runs from the revival date.
How the exam tests this
Expect a direct question: "What is the grace period for a monthly premium policy?" Answer 15 days; for other modes, 30 days. The trap is the option "one month for all modes". A second pattern asks whether a death during the grace period is covered. It is, because the policy is in force during grace.
Questions on lapse versus paid-up test one idea: a policy that has acquired a surrender value does not lapse when premiums stop; it becomes paid-up.
FAQs
What is the grace period in insurance?expand_more
It is the time after the premium due date during which you can still pay without penalty while the policy stays in force. For life insurance, IRDAI sets it at 15 days for monthly premiums and 30 days for all other modes.
Is a claim paid if death happens in the grace period?expand_more
Yes. The policy is treated as in force during the grace period, and risk cover continues as per the policy terms.
What happens if I miss the grace period?expand_more
A policy without a surrender value lapses; one that has acquired a surrender value becomes paid-up with a reduced sum assured. A ULIP in its first five years moves to the discontinued policy fund. In each case you can revive it within the revival period.
How long do I have to revive a lapsed life policy?expand_more
Five years from the first unpaid premium for non-linked policies and three years for unit linked policies, subject to paying dues and the insurer's underwriting.
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