A lapse is the termination of a right or privilege due to the passage of time or inaction by a party. For example, the coverage afforded by an insurance policy lapses because the policy holder does not pay to renew the policy for an extended period of time. Or, a warranty lapses after the one-year term of the warranty expires. As another example, a stock option lapses if its holder does exercise the option by its expiration date. Some contracts provide for a grace period before they lapse, allowing a contract holder additional time in which to fulfill the terms of the arrangement.