What is a common consequence of non-payment of premiums?

When a policyholder fails to pay their insurance premiums, one of the most common consequences is that the insurer may cancel the policy. This is because insurance policies are contractual agreements wherein the insurer provides coverage in exchange for regular premium payments from the insured. If these payments are not made, the insurer has a right to terminate the contract, as the coverage is contingent on receiving the agreed-upon payments.

Cancellation of a policy due to non-payment can result in a loss of coverage for the policyholder, leaving them uninsured and potentially liable for significant financial risks, depending on the nature of the coverage (such as auto or home insurance). The cancellation process typically follows specified protocols outlined in the policy and local regulations, which may include providing a notification period during which the policyholder has the chance to make up the missed payments.

Other options, such as increasing policy benefits, reinstatement of the policy after non-payment, or lower premiums, do not typically occur as direct consequences of non-payment and would generally not align with standard insurance practices.