Which term describes the act of forfeiting insurance coverage?

Lapse is the term used to describe the act of forfeiting insurance coverage, typically due to non-payment of premiums. When an insured individual fails to pay their policy premiums within the specified grace period, the policy will lapse, meaning the coverage is no longer in effect. This action usually happens unintentionally, as individuals may forget to make a payment or may not have the funds available.

Understanding the concept of a lapse is crucial because it highlights the importance of maintaining timely payments to ensure ongoing coverage. In the case of a lapse, the policyholder may not be able to claim benefits until the policy is reinstated, which might require them to provide evidence of personal health or undergo underwriting again, depending on the insurer's policies.

The other terms are related but do not accurately describe the specific situation of forfeiting coverage due to non-payment. Cancellation refers to the intentional termination of a policy by either the insurer or the insured prior to the policy's expiration date. Termination generally implies the end of a policy, but it does not specifically indicate it was due to non-payment. Forbearance involves delaying the enforcement of a right or the payment of a debt, which is not the same as forfeiting coverage. Understanding these distinctions is essential for effectively