The term "grace period" can have many meanings in the world of insurance. Most often though, the term refers to when an individual is unable to pay their insurance premium on time. Rather than cancelling your insurance policy when this happens, it is better to call your insurance broker and enquire about the grace period you have to pay the outstanding premium. This will differ from one insurance company to the next so it is important to call and find out. It is also very likely that in the event of an individual being unable to pay the monthly insurance premium on time that a penalty will be incurred. Again, the amount you will be penalised with will differ between companies. If, for some extreme and unforeseen reason, you are unable to pay your premium at all, you should call your broker and advise him/her of the fact. Most often, a payment plan could be arranged for the outstanding premium to be paid the next month to avoid losing your cover.