Insuring Personal Auto Exposures Practice Test

The scenario that is likely to cause a lapse in coverage is the failure to pay a premium on time. Insurance policies require timely premium payments to maintain active coverage. When a policyholder fails to pay their premiums by the due date, it can lead to a cancellation of the policy, resulting in a lapse in insurance coverage. Insurance companies typically provide a grace period for late payments, but if the payment is not made within that timeframe, the policy may be terminated, leaving the insured without coverage until the policy is reinstated or a new policy is obtained.

Switching providers for better rates can typically be done without causing a lapse in coverage, as long as the new policy starts before the old one ends. Retiring a vehicle does not inherently lead to a lapse in coverage unless the policy is not adjusted accordingly. Adding a new driver may require changes to the existing policy, but it does not automatically result in a lapse as long as the premium is adjusted and paid on time.