What happens to a life insurance policy when it lapses?

When a life insurance policy lapses, it means that the policyholder has failed to pay the required premiums, and as a result, the coverage is terminated. This is why the choice that states the coverage ends and the policy is void is the correct answer.

When a policy lapses, the insurer typically does not have any obligation to pay death benefits. The contractual agreement between the policyholder and the insurance company becomes null and void, meaning that no claims can be made against this policy for coverage.

While some policies may offer a grace period or reinstatement options, this only applies before the actual lapse occurs. The lack of premium payment leads to the loss of coverage. A policyholder may also have rights to any cash value accumulation, if applicable, but this is separate from the lapsed policy itself. Therefore, when referring to a lapsed policy specifically, it indicates a termination of coverage and validity, which substantiates the correctness of this answer.