General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An insured fails to pay a health insurance premium when due, and the applicable grace period expires without payment. As a result, the policy:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Insurance is a conditional contract: the insurer's obligation to provide coverage is conditioned on the insured's performance of stated duties, chief among them the timely payment of premiums. If the premium is not paid within the grace period, the condition is not met and the policy lapses — coverage terminates. The conditional nature of the contract is why premium payment is not merely a courtesy but the price of keeping the insurer's promise alive.
Why the other options are wrong
- B) Coverage does not continue without premium; continued payment is the condition that keeps the contract in force.
- C) A lapse terminates the policy rather than reducing its benefits; reduced-benefit provisions are governed by policy terms, not by nonpayment.
- D) Noncancelable status is a policy feature purchased at issue, not a result of failing to pay premiums.
Memory hook
Pay the premium, keep the promise. Miss the grace period, and the condition fails — the policy lapses.