New York Insurance Exam Practice Question
What is the purpose of a policy's lapse?
Correct Answer: B
Rationale: A policy's lapse serves to terminate coverage due to non-payment (B). When premiums are not paid, the insurer cannot maintain the policy, leading to its cancellation.
Option A, increasing the death benefit, is incorrect as lapses do not enhance benefits; they end coverage. Option C, waiving premiums, is misleading; a lapse occurs when premiums are unpaid, not waived. Lastly, option D, extending the free-look period, is also incorrect since the lapse signifies the end of the policy rather than an extension of evaluation time for the policyholder.
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