Lapse
Fundamental terms that define how a life insurance policy works.
What Is Lapse?
A life insurance policy lapses when the policyholder fails to pay the required premium within the grace period, causing the policy to terminate and coverage to end. For term policies, a lapse means coverage is simply lost. For permanent policies, the insurer may apply non-forfeiture options — such as extended term or reduced paid-up insurance — to provide some continuing benefit. A lapsed policy may be reinstated within a specified period (typically three to five years) if the policyholder pays all past-due premiums with interest and provides evidence of insurability. A lapse during the contestability period does not restart the contestability clock upon reinstatement; the original issue date governs.
Nevada Context
Nevada insurers must provide advance notice before a policy lapses. Nevada law requires carriers to notify policyholders of an impending lapse and to apply any available non-forfeiture options if no other election has been made.
How It Affects You
A lapse is one of the most harmful outcomes in life insurance ownership. Beyond losing coverage, reinstatement may require proving you are still insurable — potentially at higher rates or with exclusions if your health has changed.
Lapse in Practice
A Nevada policyholder stops paying premiums during a period of financial hardship; after the 30-day grace period, her universal life policy lapses — and when she attempts reinstatement two years later, she must submit to new underwriting due to a recent diagnosis.
Dollar amounts shown are illustrative. Actual amounts vary by carrier, applicant age, health status, and individual underwriting.
Related Glossary Terms
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