What does reinstatement refer to in life insurance?

Reinstatement in life insurance specifically refers to the process of restoring a lapsed policy to its active status within a defined timeframe. This typically occurs when premium payments have been missed, and the policy has not been canceled permanently. Insurers usually allow a grace period during which the policyholder can reinstate the policy by paying the overdue premiums and potentially meeting other criteria, such as proving insurability.

Understanding reinstatement is important because it provides policyholders with an opportunity to regain their coverage without having to start a new policy, which could involve additional underwriting and higher premiums based on the individual’s current health status. This flexibility can be beneficial for individuals who experience temporary financial difficulties but still wish to maintain their life insurance protection.