COVID-19 into 2021 and Grace Periods or Other Relief in the Insurance Market
In 2020, Americans who suffered financially due to COVID-19 may have found relief for insurance payments. Many auto and homeowners insurance companies made moves to offer financial assistance to customers, and some states asked insurers to help out with flexible grace periods or extension. Will this continue into 2021?
Typical grace periods are seven days for auto insurance and 31 days for life insurance but can vary among companies and states. Late payments can result in your coverage lapsing or terminating. In some cases, a policy can be reinstated by catching up with payments but insurance companies are generally not obligated to reinstate coverage.
Efforts to ease the financial strain on policyholders are in the form of time extensions, not the forgiveness of the payments. If you use a longer grace period or are able to “skip” insurance payments, your total bill will still accumulate. A variety of companies have aided consumers who have requested it. This trend does appear to have continued, but it is on a request or case-by-case basis.
Many states asked or ordered auto and homeowners insurance companies early in 2020 to provide flexibility to customers who are financially affected by COVID-19. These trends are expected to continue as consumers struggle to get back on their financial feet into 2021.
States that Have Mandated Insurance Payment Extensions and Other Relief
Alabama asked insurance companies to relax due dates for premium payments, extend grace periods, waive late fees and penalties, and allow premium payment plans to avoid lapses in coverage. Insurers in Alabama should only consider cancellation or non-renewal of policies after exhausting all efforts to work with policyholders.
- Alaska prohibits insurance companies from canceling policies due to nonpayment.
- Arkansas called for a 60-day moratorium on the cancellation or non-renewal of insurance policies due nonpayment of premium for Arkansans who test positive for COVID-19. Insurers can request evidence of the diagnosis.
- California made a sweeping order that all insurance companies must offer at least 60-day grace periods for all insurance payments to Californians, including auto, homeowners, health and life insurance.
- Colorado directed insurance companies to make reasonable accommodations to extend premium grace periods, waive late fees, provide a continuation of coverage for any expiring policy, defer non-renewals and cease cancellations for nonpayment.
- Connecticut requested that all insurance companies provide their policyholders with at least a 60-day grace period to pay insurance premiums.
- Delaware requested all insurance companies in the state suspend cancellations and non-renewal due to nonpayment of premium.
- Florida encouraged insurers to be flexible with premium payments in order to avoid lapses in coverage.
- Georgia directed insurers to refrain from canceling any policy for nonpayment of premium.
- Hawaii encouraged insurers to work with policyholders and refrain from canceling or non-renewing policies for nonpayment and to grant a grace period for premium payments. The state also encouraged insurers to work with policyholders on payment plans and waive late fees and penalties.
- Indiana asked all insurance companies to place a moratorium on policy cancellations and non-renewals. Insurers are encouraged to allow a 60-day grace period for any premium payment due from March 19, 2020 to May 18, 2020.
- Maine asked insurance companies to make all reasonable accommodations for late payments and “other problems that are beyond the consumer’s control.”
- Maryland encouraged insurance companies to make reasonable accommodations to avoid cancellation for nonpayment of premium, such as suspension of premiums due, extension of billing due dates and premium grace periods, and waiver of installment and late fees.
- Massachusetts expected insurers to take all necessary steps to avoid cancellation of policies, including flexibility in collecting premiums, such as extending grace periods and waiving late fees, non-sufficient funds fees, installment fees and penalties.
- Mississippi issued a 60-day moratorium on the cancellation and non-renewal of insurance policies for nonpayment of premium.
- Missouri encouraged all insurers to extend payment grace periods to avoid cancellation or non-renewal of policies.
- Montana encouraged insurers to be flexible with policyholders, including longer payment grace periods, and waiving late fees and other types of fees.
- Nevada encouraged insurers to take actions such as extended grace periods, flexibility with due dates for premiums, waiving late fees and penalties, and setting up payment plans. Nevada asks insurers to only cancel or non-renew policyholders after all other efforts have been exhausted.
- New Jersey encouraged all insurance companies to relax payment deadlines, extend grace periods, waive late fees and offer payment plans for insurance in order to avoid canceling or non-renewing policies.
- New York wants all insurers to offer extended payment deadlines, waive late fees and work with policyholders to avoid cancellation of policies.
- North Carolina urges insurers to relax payment deadlines, extend grace periods, waive late fees and penalties, and offer payment plans. Insurers should consider canceling or non-renewing a policy only after efforts to work with the policyholder have been exhausted. The state also ordered insurers to defer premium payments for 30 days when a customer requests it.
- North Dakota urges all insurers to provide flexibility and possible relief to customers whose finances are impacted by the coronavirus. This includes extending grace periods and payment deadlines, waiving late fees, developing payment plans, and allowing additional time before policies are canceled or non-renewed. People with claims should also be given extra time to submit “proof of loss.”
- Ohio says auto, home, life and long-term care insurers must provide grace periods of at least 60 days to customers who are financially affected by COVID-19. Insurers must also waive late fees and reinstatement fees.
- Oregon ordered all insurers to extend grace periods for payments, postpone policy cancellations and non-renewals, and extend the deadlines for reporting claims.
- Pennsylvania says insurance companies should provide extended grace periods, allow payment plans and waive late fees for those affected by COVID-19. Insurers should cancel or non-renew policies only when all other efforts to work with policyholders have been exhausted.
- Rhode Island asks all insurers to give flexibility to customers, including extended grace periods for payments, payment plans, and waiving late fees, in order to delay or avoid the cancellation of insurance.
- South Carolina advises all insurers to offer extended grace periods and extra time before a policy is canceled or nonrenewed. The state also wants insurers to extend deadlines for “proof of loss” for claims.
- Tennessee wants all insurance companies in the state to provide as much flexibility as possible to customers, including delaying premium payments and waiving late fees. Insurers should try to delay any cancellation of coverage due to nonpayment.
- Texas wants all insurance companies to work with policyholders who have financial hardships due to COVID-19. This includes grace periods for payments, temporary suspension of premium payments and payment plans.
- Virginia encourages insurers to provide extended grace periods, waive late fees and provide payment plans. Insurers should cancel or non-renew policies only when they have exhausted all reasonable efforts to work with the policyholder.
- Washington ordered auto and home insurers to give grace periods, waive late fees and not cancel policies due to nonpayment, through May 9, 2020.
- Wisconsin encourages all insurers in the state to be flexible for policyholders who have economic hardship due to COVID-19. This includes deferred premium payments and premium holidays without cancellation.
Extended Insurance Grace Periods Common in Times of Crisis
It’s not unusual for insurance companies to offer extended grace periods in times of crisis, but in the past, it has been after natural disasters. For example, after last year’s wildfires in California, the state’s insurance department ordered all insurers to grant 60-day grace periods for customers in wildfire disaster areas. One of the main concerns was that insurance bills were lost or destroyed in the fires.
The NAIC has a sortable by state, line of business, and specific insurance category database which is available for free to support the public, business community and insurance professionals. For additional regulatory information and consolidated information regarding US trends and information, please review the National Association of Insurance Commissioner’s Resource Center.