What is a “lapse” in a life insurance policy?

A lapse in a life insurance policy specifically refers to the termination of the policy that occurs when premiums are not paid within the required time frame. Insurance policies generally have specific provisions that outline the grace period allowed for premium payments. If premiums remain unpaid after this grace period, the policy will lapse, meaning that coverage ceases and the insured no longer has any life insurance benefits.

This concept is critical for policyholders to understand, as a lapse can leave them without necessary financial protection and may complicate reapplying for coverage in the future. The remaining choices do not accurately represent a lapse: a renewal pertains to a policy that has been inactive but is being reinstated, a reduction in coverage concerns adjustments made to the policy terms, and the cancellation of the policy by the policyowner reflects a voluntary action rather than an automatic termination due to non-payment.