The termination of a right or privilege through neglect to exercise it within the limited time, or through failure of some contingency; hence, the devolution of a right or privilege.
To fall or pass from one proprietor to another, or from the original destination, by the omission, negligence, or failure of some one, as a patron, a legatee, etc.
Lapse occurs when the policyholder discontinues the payment of premiums under a contract. The assumption as to the rate at which policies will lapse is important in computing embedded value. It determines how long policies are assumed to remain in-force (or persist) and therefore the duration of the flow of policy fees and charges to the shareholder.