In the context of insurance, what does "lapsed" mean?

In the context of insurance, the term "lapsed" specifically refers to a policy that has been terminated as a result of non-payment of premiums. When a policyholder fails to pay their premiums within the specified grace period, the insurance company can declare that policy lapsed, meaning it is no longer in force and will not provide coverage until reinstated.

This distinction is vital for understanding the consequences of not keeping up with premium payments. Lapsed policies can leave policyholders without insurance coverage, which can result in significant financial implications, especially if an event occurs that the insurance would have covered.

Understanding the nuances of policy statuses is essential for anyone involved in insurance—whether they are agents, policyholders, or individuals seeking coverage.