Lapse

By
rjonesx
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What is a ‘Lapse’

A lapse is the cessation of a privilege, right or policy due to time or inaction, so a lapse of a privilege due to inaction occurs when the party that is to receive the benefit does not fulfil the conditions or requirements set forth by a contract or agreement.

Explaining ‘Lapse’

When a policy has lapsed, the benefits and everything stated in the contract no longer remains active. When policy holders stop paying premiums and when the account value of the policy has already been exhausted, the policy lapses. The term itself means “lapse in coverage,” a direct translation of how a lapsed policy no longer pays benefits or provides coverage.

Lapsed Life Insurance Policies

A policy does not lapse each and every time a premium payment is missed. Insurers are legally bound to give a grace period to policy holders before the policy falls into a lapse. The grace period is usually 30 days. Insurers provide policy holders a period of 30 days to pay for the missed premium deadline.

Lapsing in Shares of Stocks

Stock shares are sometimes granted to employees as an incentive and they normally come with a restriction that stops employees from selling or trading shares for a particular period of time. When the restriction is lifted, employees become direct owners of the shares. Lapsing in shares of stocks refer to the actual restrictions and limits.

Further Reading

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