General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Because an insurance contract is unilateral — only the insurer makes a legally enforceable promise — what is the usual consequence when an insured fails to pay a premium?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
In a unilateral contract, only the insurer's promise — to pay covered benefits — is legally enforceable as a promise. The insured's obligation to pay premiums is treated as a condition of the insurer's duty, not as a promise the insurer can sue to enforce. Accordingly, when the premium is not paid, the insurer's usual remedy is to let the policy lapse or cancel for nonpayment. This is a defining contrast between insurance contracts and ordinary bilateral contracts.
Why the other options are wrong
- B) The insurer's remedy is lapse or cancellation; it does not typically sue to collect unpaid premiums because the contract is unilateral.
- C) Nonpayment relieves the insurer of its duty; coverage does not continue indefinitely without premium.
- D) Nonpayment of premium is a contract matter, not a crime.
Memory hook
The insurer promises, the insured pays — and unpaid means lapsed, not sued.