What happens if a policyholder cannot pay premiums?

• A. The policy automatically cancels immediately.
• B. Coverage may lapse; most policies have grace periods and reinstatement options.
• C. Premiums are refunded automatically after nonpayment.
• D. The insurer will cover all outstanding charges to maintain coverage.

Answer: (B)

When a policyholder can’t pay premiums, protection isn’t simply erased instantly. Most medical expense policies include a grace period—a short window after the due date during which the policy remains in force and claims can still be paid. If the payment isn’t made by the end of that grace period, the policy may lapse or terminate. Reinstatement options are commonly available within a defined period after lapse, allowing the policy to be brought back by paying the overdue premiums (often with interest) and sometimes requiring new evidence of insurability. This combination—grace periods to preserve coverage temporarily and reinstatement to restore it after a lapse—best matches how premium nonpayment is typically handled, rather than an immediate cancellation, automatic refunds, or the insurer paying the overdue charges.