First Unpaid Premium

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Definition

First unpaid premium is the first default in paying premium when the policy renewal falls due.

Description

Under an insurance policy, the contract remains valid up until the premiums are paid regularly. When the policyholder does not pay the premium on the due date for the first time, it becomes the first unpaid premium. On failure of the premium payment, the insurance company provides a grace period of 30 days. It is the duration when the policyholder is covered completely under the policy but the obligation to pay the premium applies.

Once the premium remains unpaid, the benefits under the policy will lapse.

Example

Richa took a term insurance plan for 20 years. She selected the payment frequency as annual. After paying the premium for the first year, Richa failed to pay the premium on the first renewal date 20.2.2022. So, the first unpaid premium under the term plan that Richa purchased was on the policy renewal date.

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