What is Reinstatement?
Reinstatement refers to the process by which a lapsed insurance policy—one that has been terminated due to non-payment of premiums—is returned to active status. This process allows policyholders to regain their coverage and benefits, provided they meet the insurance company’s reinstatement requirements. These requirements often include paying overdue premiums, potentially with interest, and, in some cases, submitting proof of insurability.
In the context of life insurance, such as Term Life, Whole Life, or Indexed Universal Life policies, reinstatement is especially beneficial for individuals who have allowed their policies to lapse but want to continue their coverage without purchasing a new policy. Reinstatement generally occurs within a specific timeframe, often within two to five years after the lapse, depending on the insurer’s guidelines.
The reinstatement process typically involves filling out an application and, if required, undergoing a medical examination. Upon approval, the policyholder regains full access to their coverage, and any benefits accrued under the policy are restored. Reinstating a policy can be more cost-effective than buying a new one, especially if the original policy has valuable features or accrued benefits that the policyholder wishes to retain.
Reinstatement is a helpful option for individuals who may have faced temporary financial difficulties and are now able to continue their coverage without starting over. It provides a path for continuity of coverage while maintaining the original terms of the policy.
