What occurs if a policyowner does not pay premiums and allows the policy to lapse without making any elections?

When a policyowner fails to pay premiums, the policy may lapse, which generally means it ends without any further coverage. However, the correct understanding of what happens in such cases is nuanced. Typically, when premiums are not paid and no options have been elected, the policy does not necessarily become void immediately. There is often a grace period during which the policy remains active, allowing the policyholder some time to make the payment before any lapse occurs.

In a situation where the policy lapses without any payments or elections, the policy likely would not convert to a paid-up policy, as that requires the policyholder to opt for such a change. It's also worth noting that while the insurer generally retains any accumulated cash value if the policy terminates due to non-payment, it may not always keep it if there is an alternative arrangement made, such as a paid-up policy.

Ultimately, a lapsed policy usually means that the coverage ends with no benefits payable unless there are specific provisions in the policy regarding reinstatement, conversion, or similar actions that the policyowner might choose. Thus, the accurate outcome is that the policy terminates, and if no further actions are taken, no benefits are available to the insured or the beneficiaries.