What is a Grace Period?
We often hear the words "grace period" in car insurance. A “grace period” is extra time that an insurance company may offer for you to make your car insurance payment past your normal due date. They are extending grace to allow your policy to stay in force without a lapse if you pay before the cancelation date. Not all companies or states offer grace periods. And, grace doesn’t mean no late fees. If a company charges a late fee you will get the pleasure of paying it if you go beyond your due date. Some car insurance carriers will give you a day or so without the late fee, but not many. And remember, you are in a cancelation status when you use the grace period.
Your auto insurance payments are due on the due date as directed by your carrier at the time you set up your policy. If the payment is not processed by the due date you'll receive a cancelation notice in the mail or email. Focusing on the cancel date at the end of the grace period can cause issues so it’s best to focus on your due date and only use the grace when absolutely needed. Some of the issues: often companies won’t make changes when you’re in cancelation status, your policy cancels because you pay on the cancel date not before it, some people get confused why they have 2 payments due in one month (because if you used your grace period, you’re really paying last month’s payment and still have this month due). Also, grace periods typically don’t apply to renewals since your policy term is completed at the renewal date.
Never assume a grace period or assume it’s the same from state to state or carrier to carrier. Pay attention and ask your agent if you have any questions. It’s not a good idea to use your grace period every month:
- It often adds to your insurance costs
- It can affect renewal offers with some carriers who prefer on time payments
- It can affect decisions to reinstate a policy if it ever does lapse, again carriers prefer on time payments
- It can delay change requests from being processed because you’re in cancel status
- It can affect the billing schedule in some cases on longer grace periods
- If you have an SR22, the state also gets a copy of the cancellation notice
Grace periods are meant to help folks in an emergency not be the norm, yet a few people start thinking of their due date as their grace period cancel date. That’s where it gets dicey because then they want a grace period on their grace period. Don’t let poor planning cause you to go without car insurance coverage and break the law. Some companies will work with you on due dates but not all; talk to your agent. These days we can ask our phones to give us a quick reminder to help also. Know your due date to save money plus avoid hassles and stress. As a bonus it can help your car insurance rates down the road too.
If you need help finding the right car insurance for you, contact Solo Insurance at 800-207-7656 or receive a free quote online.
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