What happens to a life insurance policy if the premium is unpaid?

When a premium on a life insurance policy is unpaid, the policy may lapse or terminate. Life insurance policies generally have a grace period, typically ranging from 30 to 31 days, during which the policyholder can make the payment without losing coverage. If the premium remains unpaid beyond this grace period, the insurer may terminate the policy.

In contrast to some of the other options, the policy does not automatically renew if payments are not made. Coverage does not remain effective until maturity without premiums, and beneficiaries cannot claim the full face value of a lapsed policy, as the insurance is no longer in force. Thus, it's critical for policyholders to stay current on premium payments to maintain the validity of their life insurance coverage.