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Question: 1 / 400

What does the term "lapse" refer to in insurance?

The termination of a policy due to claim payout

The cessation of coverage due to non-payment

The term "lapse" in insurance refers specifically to the cessation of coverage due to non-payment of premiums. When an insured individual fails to make their premium payments within the specified grace period, the insurance policy is considered to have lapsed. This means that the coverage provided by the policy is no longer in effect, and the policyholder cannot file claims for losses or expenses that occur after the termination date.

Understanding this term is crucial for policyholders to ensure they maintain continuous coverage and avoid the risks associated with a lapsed policy. It's also important for agents and brokers to communicate effectively with clients about the consequences of failing to keep up with premium payments, as a lapse can leave individuals financially vulnerable without the safety net of their insurance coverage.

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The renewal of an expired policy

The reassessment of policy premiums

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