What happens if a life insurance policy lapses?

If a life insurance policy lapses, the coverage effectively ends because the policyholder has failed to pay the required premiums. This non-payment means that the insurer is no longer obligated to provide the death benefit to the policyholder's beneficiaries. The lapsing of the policy typically results in the loss of the death benefit, which is the primary purpose of maintaining such a policy.

When a policy lapses, the policyholder may have a grace period during which they can make the overdue payment to reinstate the coverage, but if that period expires without payment, the policy is deemed lapsed. It's essential for policyholders to understand this risk, as they may not be able to secure new coverage or may face higher premiums due to health changes if they attempt to reapply for insurance after a lapse.