What should an insurer do if a life insurance policy's premium payment is not received?

An insurer is required to notify the policyholder of a missed premium payment to ensure the policyholder is aware of the potential lapse in their policy coverage. This notification serves as a crucial step in maintaining transparent communication and allows the policyholder an opportunity to remedy the situation by making the payment.

If the insurer fails to notify the policyholder and automatically lapses the policy, it may create significant issues for the policyholder, including losing coverage without proper notice. Following this procedure aligns with consumer protection laws and ensures that policyholders have the chance to stay informed about their insurance status.

The other choices do not align with standard practices. Ending the policy immediately without notification denies the policyholder the chance to act. Waiting until the next billing cycle could result in further complications without addressing the missed payment. Automatically reinstating the policy upon receipt of payment could also be problematic, as there may be specific conditions tied to reinstatement that must be met, including a grace period during which payment can be made and no lapse occurs.

Thus, notifying the policyholder of the missed payment is the appropriate response in accordance with best practices within life insurance regulations.