New Jersey Life Producer Practice Exam

Question: 1 / 400

What happens when a life insurance policy is deemed "lapsed"?

The policy remains active until further notice

Coverage is terminated due to non-payment of premiums, and the insured loses benefits

When a life insurance policy is deemed "lapsed," it signifies that the policy is no longer in force due to the policyholder failing to make the necessary premium payments. As a result, coverage is terminated, and the insured loses the benefits that the policy would have provided upon death or other specific events. This lapse can happen after the grace period for premium payments has expired, which means that the insurer will not provide any death benefits or payouts that would typically be part of the policy.

While some policies may allow for certain options after a lapse, such as a potential conversion to a different type of policy or a reinstatement period under specific conditions, the primary outcome of a lapse is indeed the termination of coverage. Understanding this concept is crucial for policyholders, as it affects the protection that life insurance provides and the financial planning associated with it.

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The policyholder may still be eligible for reduced benefits

The policyholder gains additional time to make payments without penalty

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