What happens if a policyholder fails to pay a premium on time?

When a policyholder fails to pay a premium on time, the typical provision in health insurance policies allows for a grace period. This is a specified period during which the policyholder can still make the premium payment without losing coverage. However, during this grace period, the insurer maintains the right to deny any new claims that arise. This means that while the existing coverage is still in effect, the policyholder is not able to use their insurance for any new claims until the outstanding premium is paid. If the premium is not paid by the end of the grace period, the policy may lapse or be canceled altogether.

The other options do not adequately reflect the points typically addressed by health insurance policies. The automatic cancellation of the policy upon non-payment is not immediate, as there is usually a grace period. The idea of incurring a late fee is not a standard stipulation across all policies and may vary by insurer; thus, it cannot be considered a definitive outcome. The reduction of benefits is also not a common consequence of late premium payment—policies are generally meant to maintain the same coverage until the policy lapses.