COVID-19 Triggers Extended Insurance Grace Period and Other Relief

In times of crisis, American insurance companies usually offer extended insurance grace periods to their customers affected by such disasters. For instance, after the wildfires of 2019, the California Department of Insurance (CDI) instructed all insurance companies in the state to grant 60-day insurance grace periods for their customers, particularly customers in wildfire-prone areas. Similarly, when Hurricane Harvey hit Texas in 2017, the Texas insurance commissioner encouraged insurers operating in the state to suspend insurance premium payments to allow the affected individuals to rebuild their lives.

Insurance Grace Periods During COVID

In the past, crises have mainly been in the form of natural disasters. Today, however, America is fighting a health crisis in the form of the COVID-19 pandemic. Consequently, this has led to a whole raft of regulatory activity for insurers across America. More specifically, many homeowners and auto insurance companies across the US are now offering their customers insurance grace periods. At the same time, some states are encouraging insurers to do so. Typically, the grace periods for car insurance and life insurance are 7 days and 31 days, respectively. However, the actual duration tends to vary across state lines as well as from one insurer to the other.

The Objective of Extended Insurance Grace Periods

It is important to note that insurance grace periods do not necessarily mean forgiveness of payments. Instead, the grace period aims to give policyholders some much-needed financial breathing room following a crisis, such as the COVID-19 pandemic. Remember, late payments may result in your policy terminating or lapsing, and that your insurer has the legal right to refuse to reinstate your coverage. Additionally, if you decide to use a grace period during a crisis, your insurer is unlikely to forgive your payments, meaning your payments will still accumulate over the grace period, and after the grace period expires, your insurer will require you to settle your bill in full.

Insurance Grace Periods During COVID – Policyholder Relief

Today, most states across the US have taken some measures to offer some relief to policyholders suffering financial distress due to the outbreak of the coronavirus pandemic. In most cases, these measures include bulletins and orders that encourage insurers to take the following actions:

• Offer extended insurance grace periods

• Allow customers to take extra time to pay without terminating the coverage

• Waive any penalties for late payment of premiums

Adjusting instalments and changing pay plans for customers if needed

• Extend the deadlines for filling documentation such as proofs of loss, claims notices

Note that the specific requirements and scope of these bulletins and orders vary from one state to the other, with some states mandating it and other states simply encouraging insurers to offer policyholder relief.

Extension of Grace Period Across the US

By the end of May 2020, about 18 states had issued mandates requiring insurers to provide extended insurance grace periods during COVID, while another 29 states have requested that insurance companies voluntarily extend insurance grace periods. On this front, the state of California was among the first states to act when on March 18, 2020, the California Department of Insurance (CDI) issued a bulletin asking all insurers operating in the state to offer their customers a 60-day grace period to pay their insurance premiums. Some of the other states that did something similar soon after include, among others, Indiana, Florida, Delaware, Hawaii, Maine, Alaska, Arkansas, Colorado, Connecticut, New Jersey, Ohio, Pennsylvania, and Rhode Island.

To help Americans cope with the financial stress associated with the COVID-19 pandemic, many insurers are offering policyholders extended insurance grace periods. To learn more about insurance grace periods in the COVID crisis, contact the experts at CIA Insurance and Risk Management today.

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