Most life insurance policies include a grace period during which the policy remains effective despite an outstanding premium payment. The grace period provides protection to customers against life insurance claim denials by the insurance company if a premium payment is late. As long as the insurance company receives the overdue premium payment within the grace period, the policy will remain in effect, and when the named beneficiary needs to receive the proceeds of the life insurance policy, life insurance claim denials are not allowed. If, however, the premium is not received within the grace period, the policy may lapse and the insurer may deny the life insurance claim made by the insured’s loved ones.
Often the grace period is written into the life insurance policy. Some states impose this grace period under their insurance laws. If the grace period is contractual, the specific terms, such as the period’s length and whether any penalties apply, will vary depending upon the exact provisions of the policy. Thus, in order to avoid denial of their life insurance claims, it is imperative that life insurance customers are aware of their particular policy terms.
Recently, in Corte v. First Penn-Pacific Life Insurance Co., the attorneys at Trief & Olk represented a widow whose claim to life insurance benefits was denied. The basis of the claim denial was that the woman’s husband had missed a premium payment. However, the life insurance policy obligated the insurance company to provide thirty days’ written notice in the case of a missing premium payment. Trief & Olk’s attorneys argued that not only had the life insurance company attempted to return a premium payment it had previously deposited, the company had also failed to adhere to the terms of the grace period, thus removing any valid basis for the life insurance claim denial. Arguing that the life insurance company had ignored the notice and grace period terms, which prevented the claim denial, our attorneys successfully reached a confidential settlement for our client.