What happens if a policyholder does not pay their premium?

When a policyholder fails to pay their premium, the typical consequence is that the policy can become null and void, meaning it is no longer in force. Insurance policies are contracts that require timely payments to remain valid; failure to adhere to this requirement usually results in a lapse of coverage.

Most insurance policies include a grace period, which is a specified duration following the due date during which the policyholder can make the payment without losing coverage. However, if the premium remains unpaid after this grace period expires, the policy will be canceled, and coverage is effectively terminated.

It’s important for policyholders to understand their obligations regarding premium payments, as failing to meet these obligations can lead to significant financial risks, such as being unprotected from events that the insurance was meant to cover. In this context, the notion of the insurer bearing the loss does not apply, as the responsibility to maintain active coverage lies with the policyholder through their premium payments. Therefore, the correct understanding of what happens when premiums are not paid is that the policy becomes null and void after the grace period has elapsed without payment.