What is a "lapse" in a life insurance policy?

A lapse in a life insurance policy specifically occurs when the policyholder fails to pay the required premiums on time, leading to a termination of the coverage. When premiums are not paid within the grace period defined in the policy, the insurer typically has the right to cancel the policy. This means that the life insurance benefits will no longer be available to the policyholder or their beneficiaries. The consequences of a lapse can be significant, as it may result in the loss of coverage and protection that the policy was meant to provide.

In contrast, a temporary suspension of benefits, changes in beneficiary designations, or reductions in premium payments do not accurately define what a lapse is. A temporary suspension of benefits does not terminate the policy itself, while changes to beneficiary designations and reductions in premium payments do not directly relate to the coverage status of the policy. Understanding the definition of a lapse is crucial for policyholders to maintain their life insurance coverage and ensure their beneficiaries are protected.