What does a "policy lapse" refer to?

A "policy lapse" refers specifically to the termination of a policy due to non-payment of premiums. When a policyholder fails to pay the required premiums within a specified grace period, the insurer may cancel the policy, resulting in a lapse of coverage. This means that the policyholder no longer has insurance protection, and any claims made after the policy has lapsed will typically be denied. It is crucial for policyholders to meet their premium payment obligations to avoid losing their coverage and any associated benefits.

The other options do not accurately define a policy lapse. The renewal of a policy after expiration pertains to extending coverage, which is the opposite of a lapse. The addition of extra coverage options refers to policy riders or endorsements, which enhance the existing policy rather than terminate it. Adjustments of premium rates are related to changes in the cost of coverage but do not indicate that the policy has been canceled. Recognizing these distinctions helps clarify important aspects of life insurance policies and their maintenance.