The grace period of an insurance contract is there to give policy holders a little additional peace of mind if they find that through whatever circumstances they are unable to pay an installment of their premium. This can apply to auto insurance policies as well as other common forms of insurance such as life insurance, home owners insurance, etc.
Essentially the grace period of an insurance contract will be defined in an insurance contract and this is the period that an insurer will allow your coverage to run for without you making a payment.
What is the length of a grace period in auto insurance?
The length of the grace period for your auto insurance will vary depending on the terms of your individual contract and also the insurer that your policy is with. The grace period can be very short, as little as 24 hours and it can be much longer in fact some policies allow for 30 days.
If you are uncertain of the grace period on your auto insurance policy, you should check the contract and if that doesn’t help then you should contact your insurance broker, agent or broker-agent for clarification.
Are there financial penalties for utilizing a grace period in my insurance contract?
Some insurers state in the contract that there will be no financial penalty for using a grace period extension; others level a charge against the contract holder. The only way to know whether your insurer levies a charge or not is to review your own insurance contract or contact your agent, broker or broker-agent for assistance.
Here is an example of how a grace period might function
David has auto insurance and needs to make a payment on the first of every month of $100, for his insurance. This month his paycheck is late and he won’t be able to pay until the 10th of the month. As soon as he realizes this, he contact his insurance broker and asks what he can do as he doesn’t want to lose his coverage.
The agent checks David’s policy and informs him that his contract offers a fifteen day grace period but there will be an extra charge of $10 when he makes the next payment for using the grace period, but his insurance will remain in place for the whole time as long as he makes his payment on the 10th of that month.