The average burial expense in 2019 can cost up to $9,000 and sometimes more depending on where you live.
Burial costs have become such a burden, that some seniors are opting for burial insurance that covers just funeral costs.
Life insurance can cost a great deal as well. What happens when you lose your job and cannot afford your monthly premium?
Do you just let the life insurance lapse and hope that you can find something more affordable when you do find a new job?
Do you hope you don't become mortally ill in the meantime and leave your family with no way to bury you?
You have some good news. An insurance grace period does exist with some policies, and this may just save you when you need insurance the most
An insurance grace period is much like any grace period. It's the undeserved and unearned time where insurance will still cover you even when you haven't paid your premium.
Insurance companies understand to a degree that life happens. You may have a tragedy such as a job loss or death of a family member.
You may not be able to afford the premium for a period of time. You may just forget to pay your bill.
In that time frame, if you have a grace period, your insurance will still cover you.
If a grace period exists in your policy, the typical grace period stretches out to 30 days from the time the premium is due.
This means that if your premium is due March 1 and you forget to pay the bill, your insurance will still cover you up until March 31. You have 30 days to pay the bill.
Not every company has the benefit of a grace period. Policies will vary from company to company and state to state.
In fact, some states even allow insurers to drop policyholders immediately when the company does not receive a premium payment. The company may not even be required to give advanced notice. They can drop you on a dime if you do not pay your dime.
If the thought of your insurance being canceled immediately scares you, then you're in luck. You can read your policy and call your agent.
Consider the scare a reason to learn more about what your policy says.
Do you want more scary news? If you lose your policy--if your current insurance company cancels the policy-- you'll have to reinstate your policy. This means a bit of paperwork on your end.
You need to remember: insurance is still a business. Insurance companies are made up of people who need to feed their families too. They do not thrive emotionally on knowing they're sending families away vulnerable to expensive funeral costs.
Ultimately, a good insurance company wants to help you, but it needs to function and pay its bills as well. So they will create as little time as possible between receiving payment and paying out a claim.
As you examine your insurance policy, remember: grace periods are a part of the benefit package. No regulation requires an insurance company to have them. But insurance companies write them into the policy to entice policy lookers to purchase their product.
Grace periods depend on a few different elements such as the policy type, the insurance contract terms and underwriting, and state or federal regulations.
If you're not sure if your state allows grace periods, contact your state insurance commissioner. This person and organization will have answers to your questions.
If you know you will not be able to pay your premium on a given month, call to let the insurer know you can't pay. Prepare yourself to make this call by having an action plan for the company. Tell them when you will be able to pay the premium if you know.
When you contact the company, the representative will most likely flag your account so you do not receive any undue penalty.
The grace period will start on the day payment is late.
You may come across a situation where you need to use your grace period more than once. Some policies allow you to do this but typically not in succession.
So basically, you cannot typically use grace periods two times in a row. You will not receive a 60-day grace period by tacking two 30-days together in a row.
If you need to use a grace period more than once but not in succession, there is typically no limit on how many times you can let this lapse.
However, be aware that you may incur a financial penalty.
Once again, read your policy. This should tell you the penalty for using a grace period.
If you use your grace period, and in that given time you end up dying, your life insurance will still kick in. It will still cover you during the grace period if you need it even though you have not kept up with your premium.
If you cannot pay your premium with the given grace period, insurance companies often allow you to reinstate your policy for up to five years from the end of the grace period.
Obviously, terms will differ with each company, so again, check your original policy. Also, consider calling your insurance representative to find out exactly what your policy covers.
More than just life insurance policies will have grace periods. Often you can find grace periods with health insurance, life insurance, home insurance, condo insurance, and even car insurance.
When you use your grace period or if you let our insurance laps, you need to be prepared for the paperwork that will follow.
If you let your premium laps, some companies will require you to fill out a reinstatement application.
Basically, you're reapplying for the same policy. In the process, you may be asked if you've ever had a policy canceled. If you have had a policy canceled, the company will most likely reflag you as a higher risk.
Consider this an incentive to pay your premium on time.
If you let your insurance lapse beyond the grace period, you will most likely have to fill out a health statement.
Basically, the insurance company wants to know if you're in the same health as when you first applied for insurance with them.
If you resume your payment within the grace period, you most ikely will not have to complete a health statement.
If your health has changed, you will be tempted to lie. Do not lie. If a company finds out that you lied on your health statement and then you die, your family may not receive the full benefits promised when you applied for the policy.
If a great deal of time passes after the grace period, you'll need a medical exam. Typically if more than six months have passed, your insurance company will require you to have a medical exam.
Much in a person's health can change in just six months, so insurance companies again want to evaluate their risk.
If life happens, if Murphy's Law kicks in, and you just cannot pay your premium initially, you have a grace period.
If you still cannot pay your premium within the grace period or if you need to use your grace period multiple times, consider re-evaluating your policy and your needs.
Perhaps you have too much policy for your current needs. Can you afford to have a smaller policy?
Maybe you can just find a better deal on the market for the same coverage. Consider finding a different insurance policy and company. You never know what's out there until you look.
Considering life insurance especially is an emotional decision. However, no emotion will compare to what a family will experience if they have to figure out how to bury a loved one while incurring a massive financial burden.
Do what you must do to not abuse the privilege of the grace period. Using it too often will lead a company to red flag you.
This red flag warning on your record will follow you for years. No one wants to have trouble qualifying for insurance.
Ultimately, knowing if you have a safety net otherwise known as an insurance grace period is up to you. You control this because only you can truly know your policy.
If you think you need a grace period, check your policy first. Then if you have it, do not abuse it.
Contact us for any questions you may have about grace periods or other critical insurance questions.