InsuranceFinancial Glossary
Lapsed Policy
Definition
An insurance policy that has been terminated due to non-payment of premiums beyond the grace period. A lapsed life insurance policy provides no death benefit. A lapsed health insurance policy provides no claim coverage. Some policies can be reinstated within a specified period by paying overdue premiums with interest.
Why It Matters
Letting a health insurance policy lapse is costly — you lose accumulated waiting period credits, no-claim bonus, and may face fresh underwriting with new exclusions when buying a new policy. Set up auto-debit for insurance premiums and keep a buffer for at least one year's premium in your emergency fund.