What is meant by a “lapsed policy”?

A "lapsed policy" refers specifically to a policy that has ended due to non-payment of premiums. When a policyholder fails to make required premium payments within the specified grace period, the insurance company will terminate the policy. This means that the coverage is no longer active, and the policyholder may lose their benefits, as the insurer has no obligation to provide coverage or a claim payment after the policy lapses.

In general, understanding that a lapsed policy is directly tied to premium payment non-compliance is crucial. It differs from other scenarios. For instance, if a policy is voluntarily canceled by the owner, it is not considered lapsed since the policyholder decided to terminate the coverage rather than letting it lapse through missed payments. Similarly, a policy that has reached the end of its terms has simply concluded its duration but can still be renewed, while a policy that has been claimed and paid out refers to a situation where the insurance benefits have been accessed, which does not fall under the category of lapsed policies.