What happens when a policyholder does not pay their premiums?

When a policyholder does not pay their premiums, the most likely outcome is that the insurance policy may lapse or be canceled. Insurance policies are contracts that require timely premium payments to maintain coverage. If premiums are not paid, the insurer typically notifies the policyholder about the delinquency, offering a grace period in which payment can be made without penalty. Should the policyholder fail to make the payment within this specified period, the policy is at risk of lapsing.

Once a policy lapses, the policyholder loses all insurance coverage from that point onward, and they may need to undergo a new underwriting process to obtain a new policy or may even face difficulties securing new coverage due to the lapse.

While policies can sometimes be renewed automatically, this typically requires that premiums are up to date. An increase in premium amounts generally does not occur simply because of a missed payment; instead, it usually happens during the renewal period based on risk assessments or claims history. Reducing coverage limits is also not a standard consequence of missed premium payments; instead, coverage may simply cease altogether.