Coverage ends when premiums stop. A lapse is the termination of an insurance policy because the premium was not paid by the end of the grace period. Once lapsed, the policy no longer provides protection for subsequent losses.

Life insurance lapses may allow a limited reinstatement period if the insured provides evidence of insurability and pays back premiums. Property and liability policies are more often rewritten as new business after a lapse. Lapse rates are closely monitored by insurers because they affect profitability and the stability of the in-force block.

Unintentional lapses can leave families or businesses exposed at the worst moment. Automatic payment arrangements and timely renewal notices reduce the risk. From the insurer’s perspective, persistent high lapse rates may signal product or service problems that need attention.

• Termination of a policy for nonpayment of premium
• Occurs after the grace period expires
• May allow reinstatement under conditions
• Leaves the insured without coverage until replaced