by Guest » Fri May 02, 2008 07:29 am
An applicant signs an insurance policy application and submits to the life insurance company. However, he does not pay the first premium and the polciy is Not taken up by the company after a stipulated period? is this stipulated period known as grace period as well?
Posted: Fri May 02, 2008 10:21 am Post Subject:
no, I don't think so...all grace periods I have ever heard of are AFTER the policy is in force. I think this would just be a case of not purchasing the product to begin with... :?
Posted: Fri May 02, 2008 10:46 am Post Subject:
Nope. The policy won't come to effect as long as you don't pay the first premium. If now you want to reinstate the policy you may need to pay the premiums due till date. Ask your agent to know more about this possibility, otherwise you can apply for a new plan.
Posted: Fri May 02, 2008 11:26 am Post Subject:
Agreed Lori, the grace period is available only when the policy is up and running. You actually haven't purchased the plan before paying the first premium.
The grace period normally allows you to pay the premium after the due date without incurring any late charges. If you don't pay the premium within this time period, the policy will lapse.
Posted: Fri May 02, 2008 09:26 pm Post Subject:
Some states even require that first payment is included with an application submission so that a policy is in effect upon underwriting approval, the free-look period is a short period after a policy goes into effect that the policyholder can rject the coverage and get the initial premium returned, there are two types of grace period, one as described above that keeps the policy in effect for a certain legnth of time after a payment is missed anb before incurring late fees, the other type of grace period is a short period of time after a policy lepses that the policyholder can pay owed premium and have coverage reinstated without loss of coverage or having to re- submit to underwriting for coverage.
This second type is to prevent a scanario such as someone getting badly hurt, being unable to make a payment, and dies in a short period of time, then benficiary gets no death benefit. This type of grace period allows a payment to be made and no lapse of coverage.
These all vary from state to state according to their laws and company to company within state laws.
Mac
Posted: Fri May 02, 2008 09:39 pm Post Subject:
"Grace Period" is the period of time in which the policyowner is allowed to make his premium payment and keep the policy in force without interruption. It has nothing whatsoever to do with reinstatement of a policy, which comes into play after a policy lapses due to non-pay.
The "free-look period" is another policy provision which deals with the ability to look over a policy to see if the owner wants to keep it. If the owner is within their free-lok period, decides he doesn't want the policy for whatever reason, the insurer is required to refund 100% of the premium paid to that policyowner. If the refund is requested, the coverage under the policy is considered "rescinded." In essence, the coverage is cancelled retroactive to inception and no coverage was ever in force.
An important consideration with the free-look provision: beatuplunchbox said:
the free-look period is a short period after a policy goes into effect that the policyholder can rject the coverage and get the initial premium returned
Sorry, not quite right. The free-look does NOT begin upon the effective date of coverage. The free-look period begins once the policyholder has had the policy actually delivered to him. There are often time lags in between the effective date of coverage (which can easily be the date of application depending on a number of things) and to when the policy is actually delivered.
Just about every state address both of these provisions through the statutes and rules, and are considered manadatory policy provisions in almost every jurisdiction. :wink:
There ya go!
InsTeacher 8)
Posted: Fri May 02, 2008 10:19 pm Post Subject:
Thanks for correcting that InsTeacher.
I was going from memory and should have given a more accurate explanation. It will also help me explain better to my clients too.
thanks
mac
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