Primerica Life Producer Practice Test

What is the potential downside of skipping premium payments on an insurance policy?

1. The policy benefits are enhanced

2. The coverage may decrease significantly

3. The policy could lapse without coverage

4. There are no downsides to skipping payments

The correct answer is: The policy could lapse without coverage

When premium payments on an insurance policy are skipped, a potential downside is that the policy could lapse without coverage. Insurance policies are typically contingent upon timely premium payments, and when these payments are missed, the insurer may deem the policy as inactive. This lapse can leave the insured without coverage altogether, meaning they would no longer be protected against the risks that the insurance was intended to cover. If a policy lapses, it can often result in: 1. Loss of coverage: The insured would no longer be entitled to benefits in the event of a claim, which could lead to significant financial hardship. 2. Difficulty in reinstatement: Even if the insured attempts to restore coverage later, they may have to go through a reinstatement process, which could involve additional costs, medical underwriting, or waiting periods. This emphasizes the importance of maintaining consistent premium payments to ensure continuous coverage and protection. The other options do not accurately reflect the consequences of skipping premium payments, as benefits do not enhance, the coverage does not typically decrease significantly without lapsing, and there are indeed serious downsides associated with failing to make payments.