Posts tagged ‘grace period for life insurance’

Life Insurance Free Look Provision and Grace Period Explained

Insurance companies are a bit diverse.  However, all life insurance companies must provide policyholders with a free-look period and a grace period. Each state mandates their own requirements, so the length of time can vary, but all policyholders have these benefits. The free-look period allows policy owners to change their mind about a life insurance purchase without repercussion and the grace period gives the policyholder additional time to make a payment if needed.

Free-look Period

The free-look period for a life insurance policy is the amount of time that an applicant has to change their mind about purchasing the policy. The cancellation can be requested even after the policy has been approved and placed into effect. Typically, across the nation, most life insurance companies have a ten day free- look period while others provide policy owners up to thirty days for a free-look period.

Why the Free-Look Period is Important

The free-look period is important for policyholders who decide to change their mind about purchasing a life insurance policy. If the policy owner decides to cancel the policy within the free-look period, all premiums paid are returned in full with no penalties for cancellation. This free-look period gives applicants the opportunity to apply for a plan, but if soon after they decide they are not comfortable with it for any reason, they can cancel.

Grace Period

All insurance companies must provide policy owners with a grace period. The grace period is the amount of time that the policyholder can make a payment to their life insurance plan, after the due date and before the policy lapses. Across the states, the grace period is typically thirty days. As long as the payment is made during the grace period, the policy remains in effect and is considered current.

Benefits Grace Period

The grace period is beneficial for several reasons. In the event that a policyholder forgets to mail a payment or cannot pay the bill by the due date, they have thirty extra days to make the payment. If the grace period were not available to protect policyholders, a plan could lapse and the policy would be void and terminated. In some situations, if an insured person is not eligible to qualify for a new life insurance plan, due to health conditions for example, cancellation could be devastating.

The grace period and free-look period are two provisions that are required on all life insurance policies in an effort to protect the consumer. The free-look provision allows the insured person time to change their mind and cancel a life insurance policy even after the policy is in place. Additionally, a grace period protects policyholders from losing their coverage due to a lapse in payment. Each of these benefits helps prevent the policyholder from having a plan they do not want or from losing a plan that they need.