What typically happens when a life insurance policy lapses?

When a life insurance policy lapses, the typical scenario involves the insured having the option to reinstate the policy. Reinstatement is the process by which a lapsed policy can be brought back into force, subject to certain conditions defined by the insurance company. This often requires the policyholder to pay any missed premiums, as well as any applicable interest, and sometimes to provide evidence of insurability if the reinstatement occurs after a certain period following the lapse.

In many cases, insurance companies allow a grace period for missed premium payments, during which the policy remains active. If the grace period expires without payment being made, the policy lapses. However, within a specified reinstatement window, the policyholder can often restore their coverage, avoiding a complete loss of the policy benefits.

This option to reinstate is significant because it allows insured individuals to reconnect with their coverage rather than facing the loss of benefits without recourse. The conditions around reinstatement can vary, so understanding these terms is crucial for policyholders managing their insurance.

Other potential outcomes could include permanently losing coverage or receiving refunds, but these are not the usual provisions associated with a lapse. Therefore, the reinstatement option is a crucial aspect of managing life insurance policies that lapsed due to