Florida Insurance Licensing Practice Exam

When premiums are not paid on time, the likely outcome is that the policy may lapse or be canceled. Insurance policies typically come with a grace period allowing a policyholder to make a payment after the due date without losing coverage. However, if the payment is not made within this grace period, the insurer has the right to terminate the policy, leading to a lapse in coverage. This means that the policy will no longer be active, and the insured will not be protected against risks that the policy would have covered.

The option regarding automatic renewal does not apply in this context since automatic renewals typically require payments to be up to date. Enhancing coverage usually involves an increase in premium payments, not a default in payment. Transferring a policy to a new provider would not occur simply due to late payments; such a scenario typically requires the policyholder to apply for new coverage and would not be a direct consequence of unpaid premiums.