What happens when an insurance policy lapses?

When an insurance policy lapses, it means that the contract is no longer in force due to non-payment of premiums or other requirements not being met. As a result, the policy can no longer provide benefits. This is crucial to understand because once a policy lapses, the insurance coverage ceases, leaving the policyholder unprotected until they either reinstate the policy (if possible) or acquire a new one.

While some policies might allow for a grace period or reinstatement options, those are contingent on the terms of the policy and typically require the policyholder to catch up on missed payments. In any case, the immediate consequence of a lapse is the cessation of benefits, underlining the importance of staying current on premium payments to maintain coverage.

Other choices may suggest additional consequences or actions related to a lapsed policy, such as penalties for non-payment or requirements to reapply, but the primary and immediate consequence of a lapse is that the insured loses their coverage, which directly relates to the core functionality of insurance policies.