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What is a policy lapse?

A policy lapse is what happens when you stop paying your life insurance premiums and the grace period expires. It essentially means you’re so overdue on your payments that your life insurance provider is canceling your policy. When a life insurance policy lapses, you lose your coverage because then you’ll have a lapsed policy.

What happens if a life insurance policy lapse?

Your life insurance policy won’t lapse the very next day after you miss a payment. Instead, life insurance providers are required by state law to offer you a grace period. Usually, you have about 30 days to send in your late payment. Doing so will help you avoid a lapsed policy (this is guaranteed by a reinstatement provision, a clause in insurance contracts).

If, however, the grace period passes and you haven’t sent in payment, your policy lapses. At that point, your life insurance company can — and almost definitely will — cancel your coverage. You won’t get any of your premiums returned, and your beneficiaries will be left with nothing when you die unless you purchase another life insurance policy.

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