PSI Ohio Insurance Practice Exam 2025 – All-in-One Guide to Exam Success

When a policy lapses due to non-payment of premium, it is typically the case that the insured remains covered for a grace period. Insurance policies usually include a grace period clause that allows the policyholder additional time to make a premium payment without losing coverage. During this period, which can range from 10 to 30 days depending on the policy, the insured is still considered to have active coverage. This provision is designed to provide some financial flexibility and to prevent immediate loss of coverage due to a missed payment.

In contrast to the other options, a refund is not standard practice for a policy that lapses; generally, the premium payments are considered earned by the insurer for the coverage period before the lapse. Automatic reinstatement of a policy usually requires the policyholder to submit an application and possibly pay any missed premiums, rather than taking place automatically after a lapse. Additionally, while coverage may technically end when the grace period expires without payment, it does not end immediately without notice, as the grace period provides a clear communication of impending lapse to the policyholder.