What is 'Reinstatement'

Reinstatement is the process of re-establishing the status of a person, company or law. In regards to insurance, reinstatement allows a previously terminated policy to resume active coverage. In case of nonpayment, the insured may be required to provide evidence of eligibility, such as taking a medical examination for life insurance, or pay the insurance company for the missed premium dates.

BREAKING DOWN 'Reinstatement'

Reinstatement of a life insurance policy happens after the grace period ends and the contract is no longer in force. Reinstatement requirements may vary among life insurance providers and are not guaranteed by law. The reinstatement process may depend on how much time elapsed since the policy lapse and the type of policy being reinstated. Therefore, applying for a new policy may be less expensive than reinstating an old policy.

Reinstatement Within 30 Days of Lapse

After nonpayment of a life insurance premium, a policy enters grace period status. Although the policy is technically delinquent, the insurance company remains responsible for paying a death benefit if a valid death claim is filed for the insured. If the insurance company does not receive a premium during the grace period, the policy lapses. The insurance company is no longer responsible for paying a death claim.

A life insurance policy may typically be reinstated within 30 days of a lapse without additional paperwork, underwriting or attestations of health. A reinstatement premium, larger than the original premium, is typically required. The extra value of the larger premium is added into the cash value of the life insurance policy, if any, and/or administrative expenses the company incurs from a lapsed policy.

Reinstatement After 30 Days of Lapse

After the grace period ends, the life insurance company may still let an owner reinstate a policy. The insured may be required to make legally binding statements about his health. For example, the insured may have to identify any major, potentially harmful health changes that occurred after the policy lapsed. If the insured developed a major health issue during that time, the insurance company may decline reinstatement. In addition, if the insured provides fraudulent information when applying for reinstatement, the insurance company has grounds for denying a death claim.

Reinstatement with Underwriting

After six months’ elapse since termination of the policy, an insurance company typically requires the insured go through the underwriting process again for reinstating a policy. Because people tend to face health issues as they age, full underwriting means a higher likelihood of uncovering a health concern that may make reinstatement difficult.

RELATED TERMS
  1. Life Insurance

    A protection against the loss of income that would result if ...
  2. Reinstatement Clause

    An insurance policy clause that states when coverage terms are ...
  3. Guaranteed Issue Life Insurance ...

    A type of financial-protection policy that provides cash to a ...
  4. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
  5. Term Life Insurance

    A policy with a set duration limit on the coverage period instead ...
  6. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
Related Articles
  1. Financial Advisor

    Getting Life Insurance in Your 20s Pays Off

    Find out how Americans in their 20s can benefit from a well-thought-out life insurance policy, especially if they are able to build cash value for retirement.
  2. Insurance

    Term Life Insurance: Everything You Need to Know

    Term life insurance is an affordable way to financially protect your loved ones after your death. Here's what you need to know before purchasing a policy.
  3. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  4. Financial Advisor

    Is Life Insurance From Your Employer Enough?

    Covering the needs of the ones you would leave behind is not easy. But efforts to secure a life insurance policy outside of work should pay off.
  5. Insurance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  6. Insurance

    4 Things That Keep You From Getting Life Insurance

    We look at four common reasons people give for not applying for life insurance, and see if they're legitimate.
  7. Financial Advisor

    Buying a Life Insurance Policy? Read This First

    Knowing who needs life insurance, how it works and the different types of insurance can help consumers make informed decisions about this product.
  8. Insurance

    Life Insurance: putting a Price on Peace of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
Hot Definitions
  1. Promissory Note

    A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on ...
  2. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  3. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  4. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or service at a lower cost per unit than the cost ...
  5. Nonce

    Nonce is a number added to a hashed block, that, when rehashed, meets the difficulty level restrictions.
  6. Coupon

    The annual interest rate paid on a bond, expressed as a percentage of the face value. It is also referred to as the "coupon ...
Trading Center