When something has lapsed, the benefits and everything stated in the lapsed contract or agreement no longer remain active.
Lapse is most often used in the context of insurance, where the term implies a "lapse in coverage," a direct translation of how a lapsed policy no longer confers benefits or provides coverage. Lapsing can also occur in other contexts.
What Percentage of Life Insurance Policies Lapse?
As of 2018, the lapse rate for individual life insurance policies was 4.7% and for group policies was 5%.
How Does a Lapse in Coverage Affect My Car Insurance Rates?
A lapse in auto coverage generally results in higher rates being applied. The longer the lapse, the higher the rate. For example, drivers with policies that have lapsed for up to 30 days see an 8% increase in auto insurance rates. For those with lapses greater than 30 days, the rate increase is about 35%.
Does an Insurance Lapse Affect Your Credit Score?
Most policies lapse without affecting credit. However, if the policyholder owes the insurer for coverage, the insurer may report the debt to a collection agency. Under those circumstances, the lapse can precipitate a decrease in the policyholder's credit score.
What if I no longer need car insurance?
If you’re not driving, you obviously won’t need auto insurance. Perhaps you’ll be traveling out of the country, biking, or just bumming rides off friends. Keep in mind, that if you get behind the wheel again, you might pay an increased rate. That’s because insurance companies may consider you a riskier driver than those who keep active policies.
Can my other insurance policies lapse?
Yes, your other insurance policies can lapse. A lapse in home or life insurance often occurs when you stop paying the premium.