Grace Period In Health Insurance: When Does It Apply?

A “grace period” is the time when your health insurance payment is due and the coverage will be terminated. The time given varies from provider to provider but is typically 90 days. There may be other stipulations, including if you qualify for advance payments of the premium tax credit. This article will review what a grace period in health insurance is and what a health insurance lapse is.

What is an insurance policy grace period?

An insurance policy grace period is the time when your payment is due and coverage will be terminated. Insurance companies typically do not terminate coverage immediately after the premium due date. The purpose of a grace period is to give the insured additional time to pay their premiums if needed. Forgetting to pay a bill or having unexpected expenses and needing more time to pay a bill are common occurrences. Health insurance companies are aware of this, and rather than immediately terminating coverage, they allow members additional time to pay. This provides people with continued health insurance for medical issues.

What happens if you don’t pay your health insurance?

Not paying your health insurance can result in late fees and cancellation of coverage. Thankfully, many insurance companies offer a grace period. It is common for grace periods to be 90 days, but it could be longer if you purchased coverage through the marketplace and received subsidies. If you do not pay your premium at the end of the grace period, your coverage will be terminated. This period starts the first month you don’t pay. For example:

• You made on-time payments for September and October but did not pay the premium for August.
• The grace period would end October 30 (90 days from August 1).
• Your coverage is still terminated even though you paid the premiums for September and October.

Is there a grace period for health insurance after termination?

There is no grace period for health insurance after termination. The grace period begins when you fail to pay your monthly premium. If you still have not paid the premium at the end of the grace period, you will most likely lose health insurance coverage. You may also be unable to re-enroll until open enrollment unless you have a qualifying life-changing event. Lack of payment does not qualify as a life-changing event, so you may be unable to re-enroll for coverage until open enrollment.

What is a health insurance lapse?

A health insurance lapse is a coverage gap. This may result from a lack of payment, clerical error, or other reasons. If your health insurance lapses, your coverage will stop immediately. The insurance company will no longer pay for your health care. If a lack of premium payment is the reason for termination, coverage will end when the grace period expires.

My health insurance was terminated —what should I do?

If your health insurance was terminated, contact your insurance company and ask why your coverage was terminated. You should also ask for a “letter of coverage.” This is simply a letter stating the dates you had health insurance. Other steps to take include:

• Seek coverage through COBRA. This can extend your coverage for up to 18 months if you qualify.
• Purchase a plan through the marketplace if possible.
• Appeal your health insurance company’s decision if you feel the termination was done in error.

Health insurance can be terminated for many reasons. One reason is the lack of premium payments. Most health insurance companies offer a “grace period.” This is typically the 90 days when your coverage continues. Your coverage will likely be terminated if the premium isn't paid by the end of the grace period. It is important to make this payment as you may be unable to re-enroll in coverage until the open enrollment period.