Which type of cancellation results from the insured failing to pay premiums?

When an insured fails to pay premiums, the type of cancellation that occurs is referred to as a lapse. A lapse in a policy means that the coverage is effectively suspended or discontinued due to non-payment. It happens because the insurance company has not received the required premium payments by the due date, which means the policy cannot remain in effect.

In the context of insurance, a lapse is particularly significant because it often results in the insured being without coverage, and they may potentially lose the benefits associated with the policy. Lapse typically occurs without any formal action required from the insurer, as it automatically follows the failure to meet premium payment obligations.

In contrast, flat rate cancellation involves an immediate termination of the policy and usually occurs within a set timeframe after the policy is issued, often at the request of the insured or the insurer for reasons other than non-payment. Short rate cancellation, on the other hand, involves the insured terminating the policy and typically incurs a penalty or a lesser return of premiums. Reinstatement refers to the process of putting a lapsed policy back into effect, often requiring the insured to pay all past due premiums along with any additional fees; however, this does not describe the cancellation itself.

Thus, the terminology and context surrounding the lapse