Final answer:
True, nonpayment of premium indeed refers to the failure to pay insurance premiums on time, which could lead to policy cancellation.
Step-by-step explanation:
The statement "Nonpayment of premium" means the failure of the named insured to discharge when due any of their obligations in connection with the payment of premiums on a policy, or any installment of such premium, is true.
If a policyholder does not meet their financial obligations for the premium, whether payable directly to the insurance company or its agent, or indirectly under any premium finance plan or extension of credit, the insurer may cancel the policy or refuse to cover claims.
The premium is a fundamental component of an insurance contract, representing the payment made by the insured to the insurer in exchange for the latter's promise to compensate for financial loss from a covered event.