What occurs when an insured does not pay their premiums?

When an insured does not pay their premiums, the policy lapses. A lapse in a life insurance policy means that the coverage is no longer in effect due to non-payment of premiums. Insurance companies typically impose a grace period that allows the insured to make late payments without losing coverage immediately. If the premium is not paid by the end of this grace period, the policy will lapse, and the insured will no longer have the insurance protection that the policy provided.

This concept is crucial in understanding how life insurance contracts operate and the importance of keeping up with premium payments to maintain active coverage. When a policy lapses, the insured may also lose any cash value associated with the policy, depending on the type of insurance. It's essential for policyholders to be aware of their payment obligations to ensure continuous coverage, especially if they depend on the policy for financial protection.