What is a "policy lapse"?

A "policy lapse" occurs when an insurance policy is no longer in effect due to the policyholder's failure to pay the required premiums. This typically happens after a grace period during which the policyholder could have made a payment to keep the policy active. Once the policy lapses, the coverage is terminated, and the insured is no longer protected until the policy is reinstated, if eligible. Understanding that a lapse is linked specifically to non-payment is crucial, as it distinguishes it from cancellations initiated by the insurer for reasons such as fraud or misrepresentation, which is highlighted in one of the other options presented.