What is the implication of a policy lapsing?

When a policy lapses, it essentially means that the coverage has been terminated due to non-payment of premiums. This often occurs when the policyholder fails to make the required payments within the specified grace period. Once a policy lapses, the insurer typically stops all benefits and the coverage is no longer in force.

It’s important to note that lapsing is different from potential reductions in benefits or reviews because those scenarios generally involve some level of continued validity or adjustments to the policy. In contrast, a lapsed policy means the policyholder is without insurance coverage, which can have serious implications for those relying on that policy for financial protection. Understanding this concept is crucial for agents, as they must inform clients of the importance of maintaining timely premium payments to avoid losing their coverage completely.