What is a Lapse?
A lapse refers to the termination of an insurance policy because the policyholder has failed to pay the required premiums by the due date. In term life and final expense insurance, a lapse means that the coverage is no longer in force, and the policyholder or their beneficiaries will not receive any benefits in the event of a claim.
Insurance companies often allow a grace period after a missed payment, during which the policy can still be reinstated if the overdue payment is made. However, once this grace period expires, the policy lapses, leading to a complete loss of coverage. Reinstating a lapsed policy can sometimes be possible, but it may require paying overdue premiums with interest, and possibly undergoing a medical examination to reassess insurability.
For those relying on term life or final expense insurance to provide financial protection, it’s crucial to maintain regular premium payments to avoid the risk of lapse. Once a policy lapses, the policyholder loses the peace of mind and financial safety net that these insurance policies provide, leaving beneficiaries potentially unprotected in the event of the policyholder’s death.