What Happens if Death During the Grace Period in Life Insurance?
The insured on a life insurance policy may die during the grace period which is the timeframe after a premium due date during which the policyholder can still make a payment without losing coverage. Most life insurance policies include a grace period, typically lasting 30 or 31 days, during which the policyholder can pay overdue premiums while maintaining coverage. This is a safeguard against the lapse of coverage due to a missed payment, recognizing that simple oversight can occur. During the grace period, the policy remains active, and the insurer is obligated to honor claims, provided the conditions of the policy are otherwise met.
If an insured person dies during the grace period, the policy typically remains in force, meaning the insurer will process and pay the death benefit to the named beneficiaries. But the unpaid premium at the time of death will usually be deducted from the payout amount. If a policyholder with a $1,500,000 death benefit misses a $5,000 premium payment and dies within the grace period, the insurer may deduct the $5,000 owed before disbursing the remaining $1,495,000 to the beneficiaries.
Olivia had a Jackson National Life insurance policy worth $250,000. She missed her premium payment due on January 1 but planned to pay it on January 28, well within the policy’s 31-day grace period. Tragically, Olivia passed away in a car accident on January 20. After fighting this, her beneficiaries received the $250,000 death benefit after the unpaid premium was deducted from the payout. Noah had a Protective Life insurance policy with a $1 million death benefit. After forgetting his December premium payment, Noah assumed his policy had lapsed. Sadly, he passed away on December 25, within the 30-day grace period. After fighting this, Noah’s beneficiaries, received the benefits.
The death of an insured person during the grace period underscores the importance of understanding life insurance policies and their provisions. The top life insurance lawyers from LifeInsuranceAttorney.com have handled cases involving: TransAmerica; Manulife; Western & Southern Financial Group; Banner Life; and many many more.