What is a "lapse" in life insurance?

A "lapse" in life insurance refers specifically to the termination of the policy due to non-payment of premiums. When a policyholder fails to pay the required premiums within the specified grace period, the insurance company will terminate the policy, meaning the coverage is no longer in effect. This lapse can result in a loss of benefits for the insured, as there will be no payout upon death or other claims.

Understanding the concept of a lapse is critical for policyholders to maintain their coverage and ensure that their beneficiaries are protected. It's important for individuals to be aware of their premium payment schedule and the consequences of missing payments, as this directly affects their insurance protection.

The other options address different aspects of life insurance but do not define a lapse. For instance, changing a beneficiary does not terminate the policy, reducing benefits typically doesn't involve non-payment but rather policy adjustments, and investment options pertain to the financial features of certain policies rather than to lapses. Hence, the focus on unpaid premiums clearly defines a lapse.