What does a "lapse" in an insurance policy imply?

A "lapse" in an insurance policy implies that the policyholder has failed to pay the premium on time. When a policy lapses, it usually means that there has been a failure to meet the required premium payments by the due date, resulting in the suspension of coverage. This can occur when the premium is not paid during the grace period, which is typically a specified time frame after the due date in which the policyholder can still make the payment without losing coverage.

This concept is crucial for policyholders to understand, as a lapse can lead to the loss of protection that the insurance policy provides. If coverage is lost, the policyholder may have to reapply for a new policy, potentially at a higher premium, depending on changes in their health or circumstances.

The implications of a lapse can be significant, particularly in health or life insurance, as it may leave the policyholder vulnerable to loss during the coverage gap. Understanding this term helps emphasize the importance of timely premium payments to maintain continuous insurance coverage.