What does the term "lapse" refer to in insurance?

The term "lapse" in insurance refers specifically to the termination of a policy due to non-payment of premiums. When a policyholder fails to make the required premium payments within a specified grace period, the insurance company may terminate the coverage, rendering the policy void. This concept is critical, as it underscores the importance of maintaining timely payments to keep insurance protection in force.

The other options relate to different aspects of insurance policies but do not fit the definition of a lapse. Automatic renewal refers to policies that continue into the next term without the need for additional action from the policyholder, while the conversion of term insurance to whole life reflects a change in policy type rather than an ending of coverage. Lastly, withdrawing accumulated cash value pertains to certain policies like whole life or universal life, where the policyholder can take out cash against the policy but does not specifically indicate a lapse. Therefore, understanding that lapse is directly associated with non-payment is crucial for grasping the responsibilities tied to maintaining an insurance policy.