Reinstatement of Life Insurance

Reinstatement is the term for making a life insurance policy active again after it has lapsed.  Reinstatement only happens after the grace period has ended, and the life insurance contract is no longer in force.  The ability to reinstate a policy is not guaranteed by law, so the availability of this feature may differ between life insurance providers.  The process for reinstatement and the requirements to successfully reinstate a policy may also differ, and they will depend on how much time has elapsed since the life insurance policy lapsed the company, and the product type being reinstated.

Keep in mind that because life insurance costs have been decreasing lately, it may be less expensive to get a new life insurance policy than to reinstate an old policy.  If you are interested in getting quotes for a new policy, please enter your zip code above to get started.

Reinstatement Within 30 Days of Lapse

After a life insurance premium is missed, a policy will move into grace period status, where while technically delinquent, the insurance company is still responsible for paying a death benefit if a valid claim is filed for the death of the insured during this time.  If the grace period ends and no premium is received by the insurance company to make the policy active again, it will lapse.  After a policy lapse, the insurance company is not responsible for making a death claim payout if the insured person dies after the point of lapse. Just because a policy has lapsed, however, does not mean that it is useless.  Instead of applying for a new life insurance policy, and paying premiums based on a new policy (which will be higher), the owner of the contract may have the ability to reinstate the old policy if a payment is made.

Only Payment Due

While the rules to reinstate a policy after the point of lapse can differ between companies, it is fairly common practice in the industry to allow a policy to be reinstated within 30 days of a lapse without any additional paperwork, underwriting, or attestations of health to be made.  Typically during this time, a reinstatement premium must be made, which is larger than the premium due prior to lapse.  While this premium is normally larger, it is not a fine assessed by the insurance company.  The extra value will go into the cash value of the policy, and the excess over the regular premiums due is a precaution by the insurance company to make sure the policy does not lapse again in the immediate future, which would cause administrative expenses to rise.

Reinstatement After 30 Days

After this 30 day period is over, the insurance company will still allow a life insurance policy owner to reinstate a policy, but the insured person must make some legally binding statements about their health.  Specifically, they have to identify any major health changes for the worse, and an insurance company could deny reinstatement based on these statements.  If the insured person lies about anything material, it may be grounds for the insurance company to deny a death claim in the future.  Always fill in all paperwork truthfully with your life insurance company to make sure your beneficiaries get the death benefits they are expecting.

It takes a major health issue for an insurance company to decline reinstatement, but common problems like a heart attack or stroke are valid reasons.  It is important to apply for reinstatement before this period ends, which is usually about 6 months after the lapse occurs.  The reinstatement paperwork is not too onerous for most people.

Reinstatement With Underwriting

Usually, after 6 months have elapsed since the policy termination, an insurance company will require the insured to pass through the full underwriting process to reinstate a policy.  While this is not necessarily a problem, it can create issues.

As we age health problems tend to accumulate.  With full underwriting, there is a higher likely hood that the life insurance company will uncover a health issue that may create difficulty with reinstatement.

Steps to Reinstate a Policy

1. Contact your insurance company and inquire about the amount of payment due on a reinstatement.  Also ask what the process to reinstate is, and how much longer reinstatement is an option without underwriting.
2. Fill in all paperwork truthfully, and remit payment to the correct address to your insurance company.
3. Make sure all future premium payments are made in a timely manner to prevent the policy from lapsing in the future.

While allowing a life insurance policy to lapse will leave a gap in life insurance coverage and could prevent you from providing for your beneficiaries in a way that is sufficient, there are options.  Instead of looking for a new policy to be issued, it may be wise to consider reinstating your old policy, because it could be cheaper.  Sometimes it is more expensive to reinstate a policy, and you should always compare costs for the two options.  Feel free to use our quote comparison tool to understand your options and the associated costs.

Alternative to Reinstatement

If you can not get a policy reinstated, you may need new coverage to replace the policy that has lapsed. This is usually not the best option, since life insurance tends to get more expensive as people get older. You should always pursue reinstatement before you skip ahead to buying a new policy because this is usually the least expensive option. If you must replace the policy you will need to review your available options. Things to consider are whether you can purchase additional insurance through a group plan at work or obtain coverage under a spousal insurance rider.