What does it mean when a policy is considered "lapsed"?

A policy is considered "lapsed" when it has ended due to non-payment of premiums. This situation occurs when the policyholder fails to pay the required premiums within the grace period set by the insurance company. If the premiums are not paid, the policy cannot provide coverage, and it ceases to be in force. Essentially, it reflects the policyholder's inability or decision not to maintain the policy, resulting in the loss of the insurance coverage that was originally intended.

The importance of this concept is significant in life insurance, as a lapsed policy means that the beneficiaries would not receive any benefits in the event of the policyholder’s death. This outcome emphasizes the necessity for policyholders to remain attentive to their premium payments to keep their coverage active.