Primerica Life Producer Practice Test

Which of the following statements about the reinstatement provision is true?

1. It automatically reinstates the policy

2. It requires payment of overdue premiums with interest before policy reinstatement

3. It allows reinstatement without penalty after two years

4. It is applicable only after a lapse of five years

The correct answer is: It requires payment of overdue premiums with interest before policy reinstatement

The statement regarding the reinstatement provision that is true indicates that to reinstate a lapsed policy, the insured is required to pay all overdue premiums along with interest on those premiums. This provision is crucial because it ensures that the insurer recovers the costs associated with the time the policy was inactive, allowing the policyholder an opportunity to regain coverage that could have been lost due to non-payment. The process often involves the policyholder demonstrating insurability, meaning that they may need to prove their health status as part of the reinstatement process. This can vary by company and type of policy, but the requirement of overdue premiums plus interest is a standard aspect of reinstating lapsed policies, ensuring that both parties—the insurer and the insured—are adequately balanced. Other statements do not accurately reflect the typical characteristics of a reinstatement provision in insurance. For instance, it does not automatically reinstate a policy without any conditions. Additionally, reinstatement generally does not occur without penalties or conditions after a specific time frame like two years, and it is not confined to a lapse of five years. Instead, insurance policies often set a standard reinstatement period and terms that must be met for reinstatement.