What happens if a policyholder fails to make premium payments?

When a policyholder fails to make their premium payments, most insurance policies, including ordinary life insurance, typically provide a grace period. This means that although the premium due has not been paid, the policy will remain active for a specified duration, allowing the policyholder additional time to make the overdue payment without losing coverage. The length of the grace period varies by insurer but is often around 30 days.

During this grace period, the policyholder is still covered, which is essential as it protects against any potential claims made during this time when the payment has not yet been received. If the payment is made within the grace period, the policy continues as if it were always active. However, if the payment is not made within this timeframe, the policy may then lapse, and coverage would end.

This context helps to clarify why the other options do not accurately reflect what happens when premiums are missed. A policy does not lapse immediately; a grace period is standard practice. Policies do not get automatically reinstated without the payment being made, and policyholders are generally not fined for missed payments; rather, the consequences revolve around lapsing or reinstatement processes after the grace period.