What Is The Grace Period In Child Plans
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Grace period is the maximum number of extra days allowed by the insurance company to pay your child plan premium. Grace period varies according to the method of premium payment.
There are two methods of paying premiums for child plan:
- Single premium where you make a one-time lump sum payment.
- Annual payments that can be divided into monthly, quarterly and half-yearly installments as per insurer’s discretion.
If you make annual payments, the maximum grace period available for renewal is 30 days. However, if you make monthly payments, you are eligible for only 15 days of grace period. This is true for traditional child plans. However, for unit linked insurance plans (ULIPs) the grace period is 75 days during the 5-year lock-in period.
What Happens After The Grace Period For Child Plan Is Over?
In case you don’t renew your child plan during the grace period, your policy lapses and your loved ones are left without financial protection in case of your death. A lapsed term insurance policy is a huge loss for the policyholder because he loses the entire premium he paid so far and the insurance coverage as well.
However, if the policyholder dies during the grace period, his family is eligible to receive death benefit after deduction of the unpaid premium. You should ensure that your term child plannever lapses by following a few simple rules.
Should You Buy A New Plan Or Revive A Lapsed Life Insurance?
Most insurance companies give customers the options to revive their child plan. The terms and conditions vary according to the policy guidelines of the insurer. You may also be required to undergo a medical test for reviving the policy. Generally, you have a timeframe of 2 years to revive your term insurance plan but you’ll have to shell out extra money in the form of revival fees, interest charges, penalty and costs of medical tests.
You should compare the costs of taking either of the two steps, i.e. policy revival or purchasing a new life insurance. If you had bought the lapsed child plan when you were 35 years of age and wanted to buy a new one at 45, it may cost you more. If you are still within the allowed 2-year period, add the costs of revival which includes your two-year premium, revival fees, interest, penalties and medical tests.
Conclusion
There are times when insurance companies introduce schemes for reviving lapsed policy at attractive discounts; you should take advantage of such opportunities. However, the best way to keep your family protected is to never allow your term child plan to lapse.
Also read: Which Lic Plan Is Best For Child?
