Reinstatement Provision

What Does Reinstatement Provision Mean?

A reinstatement provision in a life or property insurance policy is a clause that allows the policyholder a limited period of time to reinstate their policy after it has lapsed. To do so, the policyholder must provide evidence of insurability and pay any outstanding premiums, along with applicable interest.

Insuranceopedia Explains Reinstatement Provision

Policies can lapse for various reasons, including the failure to pay premiums. Without a reinstatement provision, a lapse leads to the termination of the policy, requiring the policyholder to re-apply if they wish to resume coverage. In this case, they may encounter higher premiums or less favorable policy terms. Letting a policy lapse is one of the common life insurance mistakes that can cost policyholders the most, since reapplying often means new medical underwriting and rates based on the policyholder’s current age.

With a reinstatement provision, however, the policy can be fully restored to its original coverage under the same conditions. The insurance company may retain the right to attach a rider to the policy, limiting coverage based on the policyholder’s updated health history. When reinstatement requires paying back premiums plus interest, some policyholders compare quotes from the best life insurance companies to see whether a new policy would actually cost less than restoring the old one.