What is a Life Insurance Reinstatement Period?

The reinstatement period is the process that can restore a policy holder’s status with a life insurance policy – even if the premium was paid late.

This provision provides protections for the insurer and the policy owner. It refers to the situation where the premium was not paid by the end of the grace period and the policy lapsed due to non-payment. (If the policy is a universal life or a current assumption whole life policy, this refers to a situation where the policy does not have a sufficient amount of cash value to pay the monthly amount of mortality and expense charges that are due.)

With reinstatement, the policy owner wishes to reactivate the policy, and for the insurer, it means that the insurance company wishes the underwrite the risk again in order to reinstate the policy.

One of the conditions that is necessary for a policy reinstatement is that the insured must prove insurability. Typically, if the policy has only been lapsed for less than one month, however, the insurer will only require a signature from the insured stating that they are still in good health. The longer that the policy has been lapsed, however, the more extensive underwriting it will take to reinstate it.

There are several reasons why it could be more advantageous for a policy owner to reinstate a policy rather than let it lapse. Some of the advantages to reinstating a policy could include:

  • The policy owner can keep his or her original premium
  • It can restore the cash value
  • There will be no new suicide clause
  • There could be more favorable and / or more liberal policy provisions in the current policy
  • The current policy may have a lower interest rate on policy loans

In many cases, it is best for the policy holder to simply continue paying policy premium on time – even if the policy contains a reinstatement period.