Reinstatement Of Policy

What Does Reinstatement Of Policy Mean?

Reinstatement of an insurance policy is the process of restoring coverage after it has been previously terminated for various reasons.

An insurance policy can be terminated when the insured has missed premium payments for several months. While a policyholder is not legally obligated to make premium payments, failure to do so gives the insurer the right to terminate the policy.

To reinstate or renew the policy, the insurer typically requires proof of eligibility and full payment of the missed premiums. For life insurance, the insured may also need to provide a current medical examination or medical update. Each insurance company has specific requirements or declarations for reinstatement.

For property or liability insurance policies, the insurer may ask the insured seeking reinstatement to sign a declaration confirming that no loss or claim occurred during the gap in coverage.

Insuranceopedia Explains Reinstatement Of Policy

Reinstatement of a policy occurs when an insurance contract is no longer in effect, and the insured wishes to restart coverage. The requirements for reinstating a policy vary by insurance provider and depend on how long the policy has lapsed as well as the type of insurance policy. Therefore, policy reinstatement is not always guaranteed or available.

For example, if an insured person fails to pay their life insurance premium, the policy enters a grace period (typically around 30 days). During this time, the insurance company will still honor valid death claims, though unpaid premiums will be deducted from the benefits. If the insured does not make payment by the end of the grace period insurance, and the insurer will no longer pay any claims.

Individuals seeking reinstatement should be aware that it is not guaranteed. If the insured has developed a significant health condition, the insurance company may decline reinstatement. Before reinstating a policy, the insurer will likely require the insured to complete an application and provide evidence of eligibility requirements, such as undergoing a new medical exam.

In general insurance policies (e.g., property or liability insurance), lapses can occur due to non-payment of premiums, material changes in risk, or a high number of claims. Once these issues are resolved, the insured may apply for reinstatement.

The reinstatement process for general insurance policies is similar. It usually involves completing an application form and signing a declaration stating that no actual or potential losses or claims occurred during the gap in coverage. Claims arising during this period, whether reported or not, would not be covered.