Merritt Personal Lines Manual: Definitions that Apply to the Mechanics of Coverage

Grace period: Unless within 31 days prior to a premium due date we deliver to you, or mail to you, at the last address as shown on the company's record, a written notice of our intention not to renew this policy beyond the period for which premium has been accepted, a grace period of 31 days will be granted for the payment of each premium falling due after the first premium. During the grace period, this policy will remain in force.

A grace period is simply a period of time after a premium due date during which coverage stays in force and the insured is permitted to make a late payment. This prevents an unintentional lapse of coverage. Policies with quarterly or annual premium payments usually provide a grace period of 31 days.

Unpaid Premium: At the time of claim payment for insured expenses, the company reserves the right to deduct any unpaid premium due.

The insurance company has the right to deduct any unpaid overdue premium from any claim payments it makes.

An example: You submit a claim for $1,000 of covered hospital expenses, but a premium payment of $250 is overdue. The insurance company is only obligated to pay $750.