What is a Payment of Premium Provision?

A payment of premium provision refers to the section in an insurance policy that outlines the policyholder’s responsibilities and options for paying their insurance premiums to maintain coverage. The provision specifies key details like:

• When premiums are due
• How premiums can be paid
• Grace periods for late payments
• Consequences for non-payment

Understanding the payment of premium provisions in your health or other insurance policy helps ensure you comply with requirements and avoid potential lapses or cancellations.

Key Parts of the Payment of Premium Provision

A typical payment of premium policy provision may contain the following key components:

Premium Amounts

• The base premium rate for the coverage period, usually monthly
• Any additional premium charges like smoker surcharges
• Notification that rates are subject to change on renewal

Payment Due Dates

• The specific date each month that payment is due
• Whether there is a grace period after the due date
• Impact of non-payment by the due date

Accepted Payment Methods

• Acceptable ways to submit payment such as:

  • Online bill pay
  • Mailed check or money order
  • Electronic bank draft
  • Credit/debit card

• Where to send or process payments for each method

Grace Periods

• The length of the grace period after a missed due date
• Whether coverage remains in effect during the grace period
• The termination date if payment is not received by the end of the grace period

Non-sufficient Funds

• Fees for bounced checks or failed electronic payments
• Whether this impacts the effective due date of the payment

Other Consequences of Non-Payment

• Impact on continuing coverage after termination for non-payment
• Responsibility for medical claims after termination
• Ability to re-enroll after cancelled coverage

Grace Periods in Health Insurance Policies

One key focus of the payment of premium provision in health insurance policies is the grace period provided for late premium payments. The length of the health insurance grace period and the consequences for non-payment within the grace period depend on whether the policy is employer-based or an individual plan, and whether the plan recipient gets premium subsidies.

Employer-Based Group Health Plans

For employer-based group health policies, the grace period for premium payments is typically 30 days. The specifics may vary by state law and insurance company. In general for group health plans:

• Premium payments are due by the 1st of the coverage month.

• There is a grace period of 30 days to pay in full if the due date is missed.

• Coverage remains in effect during the grace period.

• If payment is not received in full within 30 days, coverage can be cancelled back to the original missed due date.

• The employee is responsible for any claims incurred after the termination date.

Individual and Family Plans

For individual and family health insurance plans, grace periods depend on whether the policyholder receives premium subsidies called Advanced Premium Tax Credits (APTC):

• With APTC: There is a 3-month grace period. Coverage remains in effect the first month, but claims can be pended and denied for months 2 and 3 until payment is made in full. If all owed premiums are not paid by day 90, coverage is terminated retroactively to the last day of the first grace period month.

• No APTC: The grace period is state-defined, typically 30 days. Claims may be pended until payment is made. If premium is not paid in full by the end of the grace period, coverage terminates retroactively to the last day of the last period the premium was paid.

Premium Payment Provisions in Other Insurance Policies

The payment of premiums provision also appears in other common insurance policies with some key differences from health insurance:

Auto Insurance

• Premium due on renewal date, or monthly if paying installments
• 30 day grace period often applies
• Coverage lapses if payment is not received before end of policy term or installment grace period
• Outstanding premium must be paid to reinstate a lapsed policy

Homeowners Insurance

• Typically due annually on policy effective date
• 30-60 day grace period often allowed
• Coverage remains in effect during grace period
• Claims can be denied for losses in the termination period

Life Insurance

• Premiums due annually, semi-annually, quarterly, or monthly
• 31 day grace period mandated by law in most states
• Coverage remains in force during grace period
• If no payment made during grace period, policy lapses as of original due date

While details vary by state and insurer, the payment provision gives key specifics that policyholders should understand to comply with premium payment requirements and keep their coverage active.

Consequences of Non-Payment

Some common consequences that may be outlined in the payment of premium provision when policies terminate due to non-payment include:

• Lapse in Coverage – There is a gap in coverage until a new policy is issued or coverage is reinstated. This leaves the policyholder uninsured.

• Loss of Claims Payment – Once a policy terminates, claims for losses that occur afterwards will not be covered.

• Reinstatement Requirements – Payment of past-due premium plus a reinstatement fee may be required to restart a lapsed policy.

• Impact on Future Coverage – Non-payment history can make it more difficult and expensive to purchase new insurance.

• Responsibility for Claims During Grace Period – Depending on state law and the type of policy, claims during the grace period may remain pending and be denied if premium is not paid in full.

Knowing these repercussions can help incentivize compliance with premium payment requirements when finances grow tight.

Tips for Following Premium Payment Provisions

Here are some useful tips for complying with premium payment provisions and avoiding termination or lapse of your insurance coverage:

• Review payment provisions when you first obtain coverage to understand grace period rules and consequences of non-payment unique to that insurer and policy type.

• Note each policy’s due date and grace period end date on your calendar so you know when payment must be received by.

• Sign up for automatic payments or recurring credit card payments so premiums are always paid on time.

• If finances grow tight, contact your insurance company before the grace period expires to discuss payment plan options or assistance programs that may be available.

• Avoid missing due dates by signing up for premium due date reminders by email or text from your insurer.

• If coverage does lapse, ask about reinstatement policies and learn what actions are required to restart coverage.

Closely following your insurance policies’ premium payment provisions ensures you receive continuous coverage and claims payment. Understanding grace periods, due dates, payment options, and consequences for non-payment makes it easier to comply with premium payment requirements. Check your specific health or other insurance policies for details.