In the context of life insurance, what does the term "lapsed policy" refer to?

The term "lapsed policy" refers specifically to a life insurance policy that has expired due to the policyholder's failure to make required premium payments. When premiums are not paid within the grace period established by the insurer, the policy will terminate, leaving the policyholder without coverage. This situation often arises when individuals may forget to pay their premiums or face financial difficulties that prevent them from doing so.

A lapsed policy represents a critical concept in life insurance, highlighting the importance of maintaining timely premium payments to ensure continuous coverage. Understanding this term helps individuals manage their policies effectively and avoid gaps in their life insurance protection. Other options do not accurately define a lapsed policy, as they focus on aspects of coverage that are either active or related to renewals and extensions.