What is the definition of a grace period?
A grace period is a feature of many types of small business insurance that continues your protection even if you don’t pay your premium by its due date. Governed by state and federal regulations, grace periods may give you 30 or 31 days in which to pay for your insurance before your policy expires. Some insurance types will have a shorter grace period or none at all.
What happens if you pay your premium during the grace period?
If you pay your premium before the grace period runs out, your insurance protection will remain active. This means if an insurable event happens at your business, your insurance will still provide the benefits you need to resolve the problem.
For example, if you forget to pay for your general liability insurance, you will have the amount of time specified in your grace period to make your payment after its due date. If a customer slips and falls in your store during the grace period but before you pay, you’ll still be covered.
What happens if you fail to pay your premium during the grace period?
If you don’t make your payment before the grace period ends, your insurance provider may cancel your policy. This will leave you unprotected against property damage, lawsuits, or other liabilities, depending on the type of insurance. In short, any future insurance claims you file may go unpaid. You may also have to pay a penalty to get your policy reinstated.
Are there other disadvantages to having a policy canceled?
If your insurance policy is canceled, it can be harder for you to get insurance in the future. If you develop a history of frequent cancellations for non-payment of premiums, insurers may charge you more for coverage or may refuse to insure you.
How can you avoid having to use your policy’s grace period?
You can avoid using your policy’s grace period by paying your premium in full or by setting up automatic payments. Some insurers offer premium discounts if you pay the full amount when you purchase a policy.
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