In the context of life insurance policies, what does "lapse" refer to?

Lapse in the context of life insurance policies refers to the termination of a policy due to nonpayment of premiums. When policyholders fail to pay their premiums by the due date, their coverage can become inactive, resulting in the loss of their insurance benefits. This is a critical aspect of maintaining a life insurance policy, as keeping up with premium payments ensures that the policy remains in effect and that the intended coverage continues for the insured individual.

The other options relate to different aspects of life insurance but do not accurately define what a lapse is. For instance, policy benefits increasing over time is typically related to certain types of policies but does not concern lapses. Similarly, adjusting premiums based on age pertains to underwriting practices as the insured’s age can affect the cost of premiums, but again, this is not what constitutes a lapse. Lastly, the designation of beneficiaries is essential in determining who receives the death benefit, yet it does not connect to the concept of a lapse.