What happens if a policy lapses?

When an insurance policy lapses, it means the policy is no longer active because the premium has not been paid within the due date and any applicable grace period. Once a policy lapses, the coverage and benefits cease until the policy is revived (if revival is allowed).

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✅ Simple Definition

A lapsed policy is an insurance policy that has stopped due to non-payment of premiums, and the insurer will not pay claims until it is revived.

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✅ Consequences of a Lapsed Policy

1. Loss of Coverage
   • The insurer will not pay claims for accidents, illness, or death during the lapse period.
2. Loss of Benefits
   • Bonuses, accumulated cash value, or other benefits may be affected (in life or endowment policies).
3. Revival Possible
   • Most insurers allow policy revival within a certain period (usually 2–5 years) by paying:
     • All unpaid premiums
     • Interest or penalties
     • Sometimes, proof of health (for life insurance)
4. Impact on Claim
   • Claims made during the lapse period are not payable, even if the policy is later revived.

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✅ Example

• Annual life insurance premium due: 1st Jan
• Grace period: 30 days → Last date to pay: 31st Jan
• Premium not paid → Policy lapses on 1st Feb
• If the policyholder dies on 15th Feb → No claim is payable
• Policyholder can revive the policy later by paying overdue premiums + interest

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✅ Key Points

• Lapse occurs due to non-payment of premium.
• Policies can often be revived, but coverage gaps and interest apply.
• To avoid lapses, set reminders or enable auto-debit for premiums.