Lapse
The cancellation of a life insurance policy resulting from the failure to pay premiums within the allotted grace period.
Detailed Explanation
Once a policy lapses, the coverage is no longer in effect, and the policyholder may need to apply for a new policy, which could be more expensive or denied based on current health.
Practical Example
Michael's life insurance policy lapsed because he forgot to pay the premiums for several months and did not do so within the grace period. He now needs to apply for a new policy, and because his health has declined, the premiums will be much higher.
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