A customer gets the following error on login "Your password expired due to inactivity. Please reset your password." What does that mean? Is the NetSuite password policy also applicable on the customer center role? Is there any information on how this works?

Not all users registering on your website remain active customers. Passwords expire for web store customers who meet either of the following criteria:

The customer has not logged in within the previous three years.

It has been more than 90 days since the customer registered a login name and created a password, and the customer never logged in again.

I found this in the documentation. Does this help?

YES, that's a good find! Thanks :)