What occurs during a policy lapse?

A policy lapse occurs when the policyholder fails to pay the required premium, leading to the termination of the insurance policy. This means that the coverage that the policy provided is no longer in effect. When a policy lapses, the insurer typically does not provide any further benefits to the insured, and the individual will need to go through the process of either reinstating the policy or obtaining a new one if they seek coverage again.

The non-payment of premiums is critical; insurance policies usually have a grace period during which the policyholder can still make a payment without losing coverage. However, if premiums remain unpaid beyond this period, the coverage ceases, resulting in the policy lapse. It is essential for policyholders to be aware of their payment obligations and the potential consequences of failing to meet them, as this can significantly impact their financial security and access to insurance benefits.