What happens to policies after the grace period if premiums remain unpaid?

When premiums remain unpaid after the grace period, the policy will lapse. A grace period is a specific timeframe, usually 30 days, during which the policyholder can make a late payment without losing the coverage. If payment is not made by the end of this period, the insurer will assume that the policyholder has decided to terminate the contract and the policy will cease to exist.

Once a policy lapses, the policyholder typically loses all benefits provided by the insurance coverage, and they might not be able to reinstate the policy without taking additional steps, such as going through underwriting again.

The other options do not align with standard insurance practices. Policies are not automatically renewed without premium payment, nor are they simply converted to term policies, as that would require a specific request or provision in the policy. Furthermore, charging a penalty fee is not standard practice; insurance premiums are due on a set schedule without additional fees for late payment, although insurers may have provisions for reinstating a lapsed policy that might involve payment of back premiums or fees.