What Is the Insurance Grace Period?

Insurance is a specific form of contract. In exchange for the payment of premiums, you and your family get certain rights and protection. But what happens if you fail to pay your premium?

The good news is that you typically won't lose your auto insurance or home insurance if you are a few days late paying a premium. You have time to bring your premium payments up-to-date, and your policy will remain in force thanks to what's known as a grace period.

What Is a Grace Period?

If you are late making payments on your policies, the grace period is the amount of time you have after your due date to pay up before you lose your coverage. Your insurance provider may agree to keep your policy in place for a certain number of days, even if your premium is overdue. For example, you may have 30 days to get up to date before the insurance company has the right to cancel your policy.

Some policies may have grace periods that are shorter or longer, for instance, 31 days or 60 days. Sometimes the rules depend on your province. In Quebec, your auto insurance company can send you a letter notifying you that they are cancelling your contract for non-payment of premiums. However, your policy cannot be cancelled until 30 days after you receive that letter.

Likewise, in Quebec it's 15 days after you receive a cancellation letter for home insurance -- but the company can cancel your home insurance policy for any reason, even if you are up to date on payments.

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How Do I Know if I Have a Grace Period?

The grace period for your policy will be listed as part of the terms and conditions of the contract. If you are uncertain, you can call your insurer and ask for more details.

In some provinces, the grace period is a matter of law. Ontario's Insurance Act specifically mandates 30-day grace periods for some kinds of insurance policies, but not all.

What Happens if I Need My Insurance and My Premium Is Overdue?

If you are within the grace period, the insurance company will honour your contract. If you have a life insurance policy and you pass away unexpectedly, the insurer will pay out any claims due to your beneficiaries. The company may deduct the amount of the overdue premium from that payment.

What if I Am Several Months Overdue?

The insurance company may terminate your contract of insurance once your grace period is up. However, some companies may allow you to reinstate your policy. Typically, you will have to pay all overdue premiums from the time your contract is terminated to the date of reinstatement.

But, the company does not have to agree to the reinstatement. They may consider insuring you for a policy two or even five years after your payments stop; however, they may want new information before proceeding with your application. They would typically consider this a new policy. For example, if you have an extended health or life insurance policy, they may request a new health questionnaire. You may also have to pay a different premium rate than you did in the past.

Do I Have the Right Insurance?

It happens from time to time that most people have trouble meeting expenses. But if your insurance premium is taking up too much of your budget, perhaps you need different coverage or similar coverage but from another provider. Kanetix.ca can help you compare and find the policy that's right for you and your budget.

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