What does the term lapse mean in relation to an insurance policy?

The term lapse in relation to an insurance policy refers specifically to a failure to pay premiums, which subsequently leads to the termination of coverage. When a policyholder does not make the required premium payments by the due dates, the insurance company may put the policy into a lapsed status. This means that the coverage is no longer active, and the insured is no longer protected under the terms of the policy.

It's important to note that lapse is distinct from voluntary cancellation of a policy, which is a choice made by the policyholder. Additionally, lapse does not involve the suspension of coverage for investigations, nor does it relate to the reduction of benefits at a certain age. Instead, it specifically points to the consequences of non-payment rather than other scenarios involving policy changes. Understanding this term is vital for recognizing the implications of maintaining an insurance policy and the importance of timely premium payments.