What is an Insurance Grace Period?

An insurance grace period is an extension an insurance company may give to a client after he or she misses a payment prior to canceling coverage. It is a set amount of time in which the client will still have insurance coverage despite being in arrears on a payment. An insurance grace period can continue providing seamless benefits to an individual until he or she can make the late payment, helping the client avoid a loss of coverage.

How Do Insurance Grace Periods Work?

A grace period works by automatically extending insurance coverage for a specified amount of time when a policyholder misses a payment. Most policyholders make monthly payments to maintain their auto, health, and home insurance policies. If a client misses a payment, the insurance company will usually send a letter or email notifying the client of the overdue amount. The insurance company may also explain that it will maintain the policy through the grace period, after which the client will lose coverage. If the client pays before the end of the grace period, he or she will maintain coverage.

The specifics of an insurance grace period will depend on the insurance provider, the policy, and the client. It can also depend on the laws of the state. Before you purchase a health or auto insurance policy, find out about the company’s grace period. The provider should make this information available to you before purchase. Some companies do not offer grace periods, while others might have grace periods for as little as 24 hours. Some companies, on the other hand, extend the grace period to 90 days or longer. Your policy contract should describe the length of the grace period if there is one. Keep in mind you may also face penalties from the insurer for a late payment submitted past the due date.

Are Insurance Companies Required to Offer Grace Periods?

Some states have passed laws requiring certain types of insurers to offer grace periods to claimants. Arizona, for example, requires grace periods of at least seven days by all auto insurance companies. Arizona also has a law requiring a 31-day grace period for group life insurance policies. Even without a law requiring a grace period, many insurance companies offer them as a perk for policyholders. Most insurers wish to minimize grace periods, however, to avoid having to pay for a client’s damages while he or she is in arrears on premiums.

Are Grace Periods Extended During COVID-19?

The unprecedented circumstances surrounding the COVID-19 pandemic have led to some changes in how insurance companies are handling clients and claims. The Arizona Department of Insurance has urged insurance companies in the state to support clients through special allowances during this time. The department is working to ensure people who are struggling financially due to COVID-19 do not lose important insurance benefits.

The department is asking insurance companies to refrain from canceling policies due to nonpayment, work with clients on late payments, waive late fees and penalties, delay premium increases, and extend timeframes on medical evaluations. Many insurance companies have answered the call and changed their policies to be more client-friendly for the time being, including Allstate, American Family, Farmers, Geico, Liberty Mutual, Nationwide, Progressive, State Farm and USAA.

When to Contact an Insurance Bad Faith Lawyer

If you cannot pay your insurance premiums due to hardship related to COVID-19, find out what your insurance company’s protocol is for people in your situation. The company may be offering a longer grace period if you cannot pay due to the coronavirus pandemic. If you believe your insurance company is acting in bad faith, such as by canceling your plan before the end of a grace period, denying coverage for a valid claim or unfairly delaying your claim, contact an Arizona bad faith attorney for a free consultation. A lawyer may be able to help you hold the insurance company accountable