A reinstatement clause is a clause written into an insurance policy that makes provisions for the restoration, or reinstatement, of a policy that has lapsed because of nonpayment of the premiums. The life insurance companies usually allow a grace period when they give the insured some time to catch upon payments. It can take up to three years for reinstatement to happen after there has been a lapse in the policy coverage.
The insurance company may require the insured to show evidence of insurability. This can be a medical examination which shows that the insured has not acquired any life threatening conditions during the lapse and is relatively good health. They also require that the insured pay all past premiums plus the interest that is due on the policy and to repay any loans that are still outstanding or reinstate them.
Why Would You Want To Reinstate A Policy
The biggest advantage to reinstating a lapsed insurance policy is that you are older when the policy is reinstated and if you tried to shop for a new policy you could be subject to a higher premium. Unfortunately, it is the insurance companies discretion whether you can be reinstated into your policy or not. Often times insurance companies will deny reinstatement but offer you a different policy with a higher premium and tighter restrictions.
In today’s tough economy, insurance companies are doing whatever they can to retain business, especially life insurance. Since many Americans consider life insurance a luxury and not a necessity they are losing customers at an alarming rate. If you don’t think you can make a payment on your insurance policy, talk to your insurance carrier. They may have other options, like a reduction in premiums or a switch to a cheaper policy or a bigger grace period. It is possible to avoid the lapses if you keep you insurance company informed.