Life & Health Insurance Exam (National Portion)Policy Provisions, Options, and RidersMedium
A life insurance policy states that the policyowner can reinstate a lapsed policy within a certain period, usually 3 to 5 years, by paying back premiums with interest, proving insurability, and repaying any loans. This is known as the:
- AReinstatement Provision
- BNonforfeiture Option
- CIncontestable Clause
- DGrace Period Provision
Show answer & explanationAnswer & explanation
Correct answer: A. Reinstatement Provision
The Reinstatement Provision allows a policyowner to restore a lapsed policy to its original force and effect, typically by paying overdue premiums with interest, proving current insurability, and repaying any outstanding policy loans.
Why the other options are wrong
- B. Nonforfeiture options (e.g., cash surrender, extended term, reduced paid-up) deal with the value of a policy that has lapsed and is not reinstated.
- C. The Incontestable Clause prevents the insurer from denying a claim due to misstatements on the application after a certain period, usually two years.
- D. The Grace Period is a short time after the premium due date during which the policy remains in force without premium payment, preventing lapse.
Reinstatement Provision
A life insurance policy provision that allows the policyowner to restore a lapsed policy to full force and effect by fulfilling specific requirements, typically within a certain timeframe after lapse.
- Usually a 3-5 year window after lapse.
- Requires payment of back premiums with interest.
- Requires proof of insurability (e.g., health statement).
- Any outstanding policy loans must be repaid or reinstated.
Memory trick: REINSTATE: Re-Enter, Insurability Needed, Time's Expiring.