Insurance Reinstatement Explained

What happens when I don't pay my insurance coverage in the agreed period?

The effects of failed insurance coverage payment is crucial and vary in different companies,but the insured has a second chance to do a reinstatement.

What is reinstatement?

Reinstatement is an agreement that allows a lapsed (terminated) policy  to resume effective coverage.It occurs on all types of insurance policies.

Before reinstatement,the insurer may require evidence of eligibility, such as an updated medical examination for life insurance, and full payment of outstanding premiums.

Reinstatement of a life insurance policy occurs after the end of a grace period.

What causes termination of an insurance coverage?

There can be various causes of termination of insurance coverage from both the insurer and the insured:

I.)Lack of payment of premiums;if the insured does not pay their insurance premiums, eventually their insurance provider will cancel their policy.

II)Material change in risk; A “material change in risk” means a significant change to the insured home, one that’s large enough for the insurance company to revaluate whether or not they wish to continue coverage.

III)Too many claims;If a customer makes  too many claims within a short period of time, their insurer may cancel coverage.

Advantages of Reinstatement of a Term Policy

•Existing terms and conditions: With the reinstatement of the existing policy during the revival period, the old terms and conditions as stated by the insurer are applicable. In case a new Term Plan is purchased, it might have new terms and conditions.

•Incontestability period: This is a time period usually in most life insurance policies or in some Term plans where the insurer can question the payout of the policy within the first two or three years of purchase. 

•Premium payment: The payment of premiums towards a new Term Plan will usually cost more than clearing the outstanding payments for a lapsed policy.

 Disadvantages of Reinstatement of a Term Policy

  

•No benefits in survival;If the policyholder survives the term of the policy, no benefit is paid out.

•No money back;If you have a Term Life insurance policy that has lapsed, it typically means that the coverage has ended because you didn't make the required premium payments, and cannot get any money back from the policy, as the coverage has already expired.