What does a grace period mean when it comes to insurance? I keep seeing the term when shopping for car insurance but I don’t know what it means.
A grace period can mean a couple of different things when it comes to insurance:
If you’re shopping for car insurance, it means that first one. But it’s good to be aware of the second meaning, too.
Does every kind of insurance have a grace period? Should I be looking for one when I choose a policy?
Not really. A grace period isn’t an official thing in the insurance world. It just loosely means “a period where we’ll cut you a little slack.”
Let’s look at life insurance. It can be tough to get, especially as you get older. Life insurance companies know how important that coverage is for their customers.
So instead of being harsh with their customers over a single missed payment, life insurance companies almost always allow you a grace period in which to pay the premium before cutting off coverage. This is especially important if someone misses a bill during a health emergency. You absolutely don’t want to lose life insurance coverage at that time.
Car insurance grace periods are the most common insurance grace period. During the grace period, your old car insurance coverage is automatically extended to your new car. These grace periods exist because many people buy cars on weekends or at other times when they can’t easily contact an insurance agent.
Other types of insurance sometimes offer other grace periods, but they vary a lot from company to company.
I’m planning to buy a new car. Will my car insurance cover it automatically? Do I have to let my insurance know right away, or can I wait till it's convenient?
Car insurance companies give their customers a grace period when they buy a new car. You have a certain number of days (it can be as few as 2 or 3, or as many as 30) to alert your insurance company about the new car and get it officially covered.
But in the meantime, your new car is covered. If you get into an accident, you’ll have liability insurance (the legal minimum), and you may have comprehensive and collision coverage as well, depending on the specific terms of your insurance policy.
These grace periods apply whether you’re replacing your car or adding an additional new car to your policy. You just need to let your insurance company know to remove your old car if you’re replacing it.
Sometimes the grace period for liability coverage is longer than it is for collision and comprehensive coverage, since those last two tend to be more expensive and complicated types of coverage. The grace period for your liability coverage could be as long as 30 days, while the grace period for collision and comprehensive could be only 3 days.
It’s important to know the exact terms of your car insurance before relying on a grace period. You definitely don’t want to wait too long to alert your insurance company. Let them know about the new car as soon as you can.
I’m buying a new car on a holiday weekend and I’m nervous about my insurance coverage. How can I make sure I stay within the grace period when my insurance company’s offices will be closed for at least 3 days? I don’t even have a way to contact them during that time! They won’t cut off my coverage, right?
The best thing you can do is to let an independent insurance agent know that you’re planning to buy a car the week before the holiday weekend, if you can. That way they can get a head start on the paperwork to make sure everything is processed ASAP.
You can also check your policy yourself to see what it says about grace periods. If you’re having trouble understanding all the legalese and insurance jargon, an independent insurance agent can help translate.
Grace periods are built into car insurance for exactly the scenario you’re describing. The terms of each grace period can vary a lot, so be sure to check the fine print of your insurance policy before continuing. Good luck and enjoy your new car!