What impact does a policy lapse have in a deposit term insurance policy?

In a deposit term insurance policy, when a policy lapses, the insured forfeits the deposit. This type of policy typically requires the insured to make a deposit for coverage over a certain period of time, and if the policy is allowed to lapse—meaning the premium payments are not maintained—the deposits made are generally not refunded.

The mechanics of deposit term insurance involve using the initial deposits as a means to provide coverage for a specified term. If the policyholder fails to meet ongoing requirements (like premium payments), they lose the benefit of having that insurance and, in most cases, they also lose any accumulated deposits. Thus, the forfeiture of the deposit reflects the financial commitment and responsibilities associated with maintaining the policy.

Other options such as receiving a full refund, insurance continuing without penalty, or automatic renewal would not apply in the situation of a lapse, as they misrepresent the consequences laid out in the terms of deposit term insurance.