Grace period

What is a grace period in insurance?

A grace period is defined as a period of time during which you are still covered by your insurance, even if you didn’t pay your premium on time.

How long is an insurance grace period?

Essentially, it’s a little leeway your insurance company gives you to get your next payment in, instead of dropping your coverage as soon as you miss a payment.

Depending on your policy, a grace period can be as short as 24 hours or as long as 30 days. If you’re unsure of how long you have, look at your policy. The amount of time you’ll get will be there, so don’t miss it.

Certain types of insurance grace periods are state-regulated, which dictates the minimum grace period insurers must offer depending on the policy type.

Be aware: Not every policy comes with a grace period. Depending on your coverage, some states allow insurers to drop policyholders immediately, without advance notice, if their premiums are not paid on time. So again, check double check your small business insurance policy.

How a grace period works

Let’s say you own a cleaning business and have general liability insurance to help cover bodily injuries and property damage. You know your premium’s payment due date is the 5th of every month, so you write a check like you always do. But things get a little crazy, and you forget to put it in the mail until the 7th.

On the 8th, you pull into a client’s driveway and clip their mailbox, damaging the mailbox. Ugh. Are you covered?

If your policy doesn’t have a grace period, then your insurer could consider the coverage lapsed on the 6th and wouldn’t pay for any damages. On the other hand, if you have a 2-day grace period or longer, then the damage will be covered just as if you paid on time. Whew.

While a grace period is useful if you need a little wiggle room, it’s not a get-out-of-jail-free card. As with most bills, paying after the due date generally comes with late fees. And if you’re regularly making late payments, your insurance company may charge you higher premiums when you renew.

Falling from grace (and how to get back into it)

If you find yourself regularly paying in the grace period, you’re playing a dangerous game. After all, miss the grace period, and your business is no longer covered. Additionally, if your policy is canceled due to non-payment, that’s a black mark on your record. Future insurance companies may charge higher premiums or not cover you at all.

But insurers want you as a customer. You don’t think they make all those advertisements for fun, do you? Canceling your policy and making your life difficult is not something they want to do.

If you’re regularly paying in the grace period, talk to your insurance company. Change your billing cycle’s due date if it doesn’t work with your payday schedule. Set up automatic monthly payments, so you don’t have to think about it. Or maybe decrease your coverage if you find yourself struggling to pay your premiums every month.

Finally, if you ever know you can’t make a payment within the grace period or a length of time, speak up. Your insurer may be willing to set up a payment plan so you can keep your policy active even if you haven’t paid your premium in full.

A grace period is an insurance company’s way of helping you out when things go wrong. It’s best not to rely on it, but it’s nice to know it’s there when you need it.

Business insurance that works for you with NEXT

At NEXT, we know when running a small business, things happen. That’s why you need insurance. But managing it shouldn’t be a hassle.

That’s why NEXT gives you 24/7 DIY access to manage your coverage on your schedule.

You can start a quote, customize your options and access your certificate of insurance online immediately after purchase.

Start your instant quote today.