What happens if a policyholder fails to pay their life insurance premium?

When a policyholder fails to pay their life insurance premium, the correct outcome is that the policy may lapse after a grace period. In life insurance policies, it is common practice to include a grace period, typically lasting from 30 to 31 days, during which the policyholder can make the premium payment without losing coverage. If the payment is made during this grace period, the policy remains in force.

If the premium is not paid after this grace period, the policy will lapse, meaning that the coverage provided by the policy ends, and the insurer is no longer liable for any claims. This process acknowledges that situations may arise that prevent timely payment, providing policyholders additional time to fulfill their obligations before consequences take effect.

The other choices do not accurately reflect standard life insurance protocols: policies do not automatically renew without premium payment, insurers are not required to keep a policy active for an additional month, and immediate cancellation is typically not the standard practice in the industry.