Policy termination due to nonpayment of premium is referred to as what term?

Policy termination due to nonpayment of premium is referred to as what term?

• A. Surrender
• B. Extension
• C. Lapse
• D. Revival

Answer: (C)

When a premium isn’t paid by its due date, the policy enters a grace period. If the payment isn’t made within that window, the coverage ends and the policy lapses. That termination due to nonpayment is called a lapse. Surrender means you’re cashing out a policy’s value and ending it voluntarily, not because of missed payments. Revival is the process to restore a lapsed policy, typically by paying the overdue premium and, sometimes, evidence of insurability. An extension would only extend the grace period, not terminate the policy. So, the term for termination due to nonpayment is lapse.

When a premium isn’t paid by its due date, the policy enters a grace period. If the payment isn’t made within that window, the coverage ends and the policy lapses. That termination due to nonpayment is called a lapse. Surrender means you’re cashing out a policy’s value and ending it voluntarily, not because of missed payments. Revival is the process to restore a lapsed policy, typically by paying the overdue premium and, sometimes, evidence of insurability. An extension would only extend the grace period, not terminate the policy. So, the term for termination due to nonpayment is lapse.