Primerica Life Producer Practice Test

In insurance terms, what does reinstate refer to?

1. To begin a new policy

2. To return a lapsed policy to active status

3. To increase the coverage amount on a policy

4. To convert a term policy to whole life

The correct answer is: To return a lapsed policy to active status

The term "reinstate" in the context of insurance specifically refers to the process of returning a lapsed policy to active status. This means that if a policyholder has missed premium payments leading to a policy becoming inactive, they have the option to reinstate the policy by fulfilling certain conditions set by the insurance company, such as paying back premium arrears or providing evidence of insurability. This process is important because it allows policyholders to regain their coverage without having to go through the application process again, which could involve new health assessments and potentially higher premiums. Reinstituting a lapsed policy ensures the continuity of coverage and protection for the insured party. Other options, like starting a new policy, increasing coverage, or converting a term policy to whole life, involve different processes and objectives within the realm of insurance that do not align with the action described by "reinstate."