What happens if the policy owner fails to pay the premium and the grace period expires?

The correct choice regarding the implications of failing to pay the premium after the grace period refers to the automatic lapse of the policy. Once the grace period expires and payment has not been made, the policy typically becomes inactive without additional notice to the policy owner.

In most instances, if no premium payment is received during this grace period, the insurer will automatically lapse the policy, which means it will no longer provide coverage or benefits to the policyholder. This lapse can significantly impact the policy owner's ability to secure life or health insurance coverage in the future.

The suggestion that a loan against the cash value is automatically made does not usually apply unless there is an action taken by the policy owner. Policies with cash value allow the owner to take out loans; however, this does not happen automatically upon failure to pay premiums. Therefore, once the grace period ends, the policy effectively becomes void if no payments have been made.