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5 Important Facts to Consider for Death During Grace Period

A life insurance plan is the best way to secure your family in case of your unexpected demise. It will provide a sum assured to the nominee as the death claim. The payment is subject to certain terms and conditions.
 

One of the most primary factors is the regular premium payments. It is understandable and quite permissible if there is a problem associated with paying the premium on time. However, there is a limit on the time that the insurers can offer for an acceptable death claim.
 

In the broad sense, it is referred to as the grace period insurance claim. It differs with every policy and with every insurer in a certain way. Let us discuss five important facts to consider for death during the grace period.


 

What is the grace period?
 

Grace period refers to the additional time or extra days the life insurance company provides for the renewal premium payment if it is not made on time. 


 

Why is the grace period introduced in life insurance plans?
 

Grace period insurance option is provided to the policyholders to prevent them from losing the life coverage due to a temporarily difficult financial situation. It is very common in households and needs to be considered. The grace period acts as a shield for maximum protection.


 

Five facts to consider for death during the grace period
 

 

  1. Death claims are accepted during the grace period - There is a general notion among the policyholders that the claim made during the grace period is not accepted. However, the claim will be accepted if the policy has not been lapsed or stands active until that date.

  2. Sum assured stands unaltered - If the premium amount is not paid within the due date, the insurer provides a grace period. If the renewal payment of the premium is made during this period, the sum assured and the associated benefits will remain unaltered. If the policyholder makes the payment and later dies during the grace period, the nominee will have the complete leverage to apply and get the death claim. 

  3. Insurance policy grace period is variable - The grace period associated with a life insurance policy is not fixed. It depends upon the premium payment modes. Premium amount is paid monthly, quarterly, half-yearly or annually. For the monthly payment mode, the grace period is generally fifteen days, and for the other modes, it is thirty days and not less than that. 

  4. No additional charges - If the premium payment is missed for some reason and the policyholder tries to make it possible during the grace period, there are no additional charges generally. And, during the life insurance grace period, if an unexpected death occurs, the death claim will also be approved and paid to the nominee without any extra charges.

  5. Possible deductions - Supposing if the premium amount for renewal is not yet paid during the grace period and the policyholder meets with a sudden demise. In that case, the insurer will deduct a quantum of the amount; generally, the premium amount due for payment, and the rest is assured to the nominee.  


 

ULIP Policy: A Special Case
 

It has been considered one of the apt investment products introduced by life insurance companies. It provides dual benefits. One portion of the premium paid towards the ULIP policy provides life cover, and the other portion is invested in the securities. The ULIP policy has a lock-in period of five years. Partial withdrawal is permitted after that.
 

However, if a policyholder fails to regularly make the premium amount even after providing the grace period, the insurer will discontinue the policy. There are two possible solutions for the policyholder in this case:
 

  1. Revival of the ULIP policy - Once the policyholder fails to make the premium payment, the life insurance company will send a notice within fifteen days just after the grace period for the revival of the policy. If the policyholder decides to revive the policy, the policyholder must make the payment towards the unpaid premium amounts within a span of two years with applicable charges. In that case, the revival will be accepted and carried out before the lock-in period expires.

  2. Withdrawal without considering the insurance cover - Supposing if the policyholder decides to withdraw the ULIP policy on receiving the notice. In that case, the policyholder should intimate the insurance company within thirty days. The insurer will reimburse the proceeds from the policy that is discontinued after the lock-in period. Also, if the policyholder discontinues the ULIP policy within the lock-in period, there will be no benefits on ULIP taxation*.
     

TATA AIA Life provides various funds for investing with their wealth solutions. If in case the policyholder is not satisfied with the movement of the fund in the market or the related returns, a switchover of the fund can be decided. It will stabilise the fund value and contribute to the return in the long run.
 

Policyholders should consider such options rather than failing to pay the premium amount even until the grace period ends. 


 

Summing Up
 

The life insurance companies introduce a grace period to protect the policyholder's life cover. The primary reason is that a simple incident or a temporary financial crisis should not affect the whole sum assured that has been accumulating for years. As a moral obligation and responsibility, every policyholder would ensure regular premium payments.
 

Death during the life insurance grace period will be considered, provided the renewal premium payment is made on time. The policy will get lapsed if the premium is not paid after the grace period, and further, no intimation is made in that regard.
 

Also, in the special case of a ULIP policy, the premium payments not made during the grace period will proceed for discontinuation if proper steps are not taken towards revival or withdrawal. Every life insurance plan is purchased for a reason.
 

Stay invested for the benefits to incur and utilize the grace period if there is a need for maximum protection!
 

L&C/Advt/2023/Feb/0571

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimer

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not a guaranteed issuance plan, and they will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions, please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services, and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication; however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility for tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
  • THE LINKED INSURANCE PRODUCT DO NOT OFFER ANY LIQUIDITY DURING THE FIRST FIVE YEARS OF THE CONTRACT. THE POLICYHOLDER WILL NOT BE ABLE TO SURRENDER/WITHDRAW THE MONIES INVESTED IN LINKED INSURANCE PRODUCTS COMPLETELY OR PARTIALLY TILL THE END OF THE FIFTH YEAR.
  • Past performance is not indicative of future performance.
  • All investments made by the Company are subject to market risks. The Company does not guarantee any assured returns. The investment income and price may go down as well as up depending on several factors influencing the market.
  • Please make your own independent decision after consulting your financial or other professional advisors.