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What is a Lapsed Policy in Life Insurance?

Neviya LaishramJul 30, 2025

A lapsed policy refers to a policy that has been terminated due to the non-payment of premiums. In simple terms, a lapsed policy means your life insurance has stopped working because you didn’t pay the premium on time, even after the grace period. When this happens, you lose the coverage and the benefits promised by the policy.

For example, if your premium was due on May 1st and you didn’t pay it even by the end of the grace period (usually 15–30 days), the policy will lapse.

Contents

Lapsed Policy in Life Insurance: Grace Period and Revival
Example:
Lapsed Policy Vs Surrendered Policy
Why Understanding Policy Lapse Matters for Policyholders
Bottom Line
Frequently Asked Questions

Lapsed Policy in Life Insurance: Grace Period and Revival

If the insured does not pay the premium within the grace period, the policy will lapse. In this situation, the insured can no longer avail themselves of the benefits and coverage provided under a policy.
The grace period from the due date of the premium is:
-15 days for policies with monthly premium payments
-30 days for policies with quarterly, half-yearly, or annual premium payments
A lapsed policy can be revived during the period specified in the policy document. For that, the insured has to pay the unpaid premiums, along with interest or a late fee.
Depending on the terms and conditions of the policy, a medical examination may be required for policy revival

Example:

Ritu has a term life insurance policy with a ₹10,000 (monthly premium). Unfortunately, she loses her job, due to which she misses two consecutive premium payments of ₹20,000. Her policy lapses, and the life cover ceases immediately. However, her policy can be reinstated with full benefits if Ritu manages to pay the two missed premiums (₹20,000) along with any applicable interest or late fee, within the revival period.

Lapsed Policy Vs Surrendered Policy

Any policy that has lapsed or has been surrendered implies that it is no longer active. However, there are some key differences between them. Let’s have a look.

Feature	Policy Lapse	Policy Surrender
Meaning	A policy lapses or becomes inactive when premiums are not paid beyond the grace period.	Voluntary surrender of the policy before maturity.
Initiator	Automatically initiated due to missed payments.	Voluntary initiation by the policyholder.
Coverage	Life insurance coverage ends immediately.	Coverage continues until the surrender request is processed. Then, the policy terminates.
Benefit Payout	No benefits will be payable unless the policy is revived.	Surrender value is paid to the policyholder, depending on the policy type and terms.
Policy Restart	Can be revived within the period specified in the policy document.	Cannot be revived; once surrendered.
Impact on Beneficiaries	Beneficiaries are not entitled to the death benefit.	Once surrendered, the policy ends. No death benefit is payable.
Costs Involved	Insurers may ask for late fees or medical check-ups during revival.	Insurers may ask you to pay surrender charges.

Why Understanding Policy Lapse Matters for Policyholders

A lapsed policy means your loved ones no longer have life insurance coverage due to an inactive policy. This means that no claim amount will be paid to the beneficiaries, making it all the more important for policyholders not to let the policy lapse. Understanding policy lapse and how it works can help policyholders retain their coverage and protect their family's future by making the premium payments on time.

Here are some risks of lapsing a policy:

Loss of life insurance coverage
Additional policy revival cost with added medical check-ups, depending on the insurer’s terms

Situations that can cause payment delays:

Job loss
Cash crunch
Lack of awareness about premium due dates or how policy lapses work.

Bottom Line

Life insurance is a valuable financial tool designed to protect your family’s financial future, but that protection only works if your policy stays active. A lapsed policy can take away that protection. While most policies can be revived, they often come with extra costs and conditions like medical check-ups.

Remember that having a life insurance plan in place is a long-term commitment that can help secure your loved one's future. So, make sure to stay on top of your premium payments and set reminders if needed.

Frequently Asked Questions

Below are some of the frequently asked questions on Lapsed Policy in Life Insurance

What will happen if I make a late premium payment?

If you make a late premium payment within the grace period (usually 15–30 days, depending on your payment frequency), your life insurance policy will stay active. However, if you miss the payment even after the grace period, your policy will lapse.

What does it mean when a policy is lapsed?

A lapsed policy means your life insurance has stopped working because you didn’t pay the premium on time, even after the grace period.

Can I renew a lapsed policy?

A lapsed policy can be revived during the period specified in the policy document.

What is the difference between surrender and lapse?

There are many key differences between surrender and lapse. One of the main differences is that a lapse happens automatically when you miss your premium payments and don’t pay within the grace period; on the other hand, a surrender is a voluntary action by the policyholder.

What is a lapsed policy status?

A lapsed policy status means your policy is currently inactive because the premium was not paid even after the grace period.

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