How does a life insurance policy lapse?

A life insurance lapse can occur when you fail to pay your premium on the policy. With life insurance policies, you have a certain date by which you have to pay your premium. If you do not pay by that date, you will fall into the grace period. This grace period gives you an additional 31 days to pay after the due date on your policy. If you fail to pay your premium by the end of the 31-day grace period, your policy will lapse.

Some plans have a "paid-up policy." With a plan like this, you need to pay premiums for a set number of years, and then, the policy is completely paid up. This means that you no longer have to make premium payments, and you will have a policy with a specific death benefit. If you have this kind of policy, after you reach the point of having paid in full, you will not have to worry about any lapse in coverage from a failure to make a payment.

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