What happens if a premium is not paid on a life insurance policy?

When a premium is not paid on a life insurance policy, the policy may still be eligible for non-forfeiture options. Non-forfeiture options are provisions within a life insurance policy that protect the policyholder in the event of non-payment of premiums. These options allow the policyholder to retain some value from the policy rather than losing everything due to missed payments.

For instance, if premiums are not paid for a certain period, the policy may go into a grace period during which the policyholder can pay the overdue premium without losing coverage. If the policyholder fails to pay after the grace period, non-forfeiture options can allow the policy to be converted to paid-up insurance, meaning the policyholder can maintain a reduced amount of coverage without having to pay further premiums. This preserves some of the benefits of the policy despite the non-payment, rather than simply canceling the policy entirely.

In contrast, automatic voiding of the policy, remaining active without coverage, or automatic conversion to term insurance would not accurately reflect the process or protections that exist under typical life insurance policies when premiums are not paid. Each of these situations would be more drastic and would not usually account for the rights and options available to the policyholder under non-forfeiture provisions.