The two major actions required for a policyholder to comply with the Reinstatement Clause are
A)provide evidence of insurability, agree to a new incontestable period
B)provide evidence of insurability, pay past due premiums
C)pay past due premiums, agree to a new incontestable period
D)pay past due premiums, agree to a reduction in coverage
The Correct Answer and Explanation is:
The correct answer is B) provide evidence of insurability, pay past due premiums.
Explanation:
The Reinstatement Clause in a life insurance policy allows a policyholder to restore a lapsed policy, typically due to non-payment of premiums. When an insurance policy lapses, the policyholder loses coverage, but many policies include a reinstatement provision, allowing them to reinstate the policy under certain conditions.
For a policyholder to comply with the Reinstatement Clause, they typically must take two major actions:
- Provide Evidence of Insurability:
- Evidence of insurability refers to the policyholder providing proof that they are still in good health and insurable, despite any lapse in their policy. The insurer may require a medical exam or other forms of documentation to assess whether the policyholder’s health has changed since the policy lapsed. This is important because, during the period of policy lapse, the policyholder’s health status may have deteriorated, and the insurer wants to ensure that the policyholder still meets the underwriting standards.
- Pay Past Due Premiums:
- The policyholder must also pay all the premiums that have accrued since the policy lapsed. This ensures that the policy is reinstated to its original status. The insurance company will often give a specific period (usually a few years) during which reinstatement can occur. If this period has passed, reinstatement may no longer be possible.
The Reinstatement Clause gives policyholders a second chance to regain coverage without needing to apply for a new policy, but it comes with conditions to ensure that the policyholder still qualifies for coverage.
The other options are incorrect because:
- A) While agreeing to a new incontestable period might occur in some reinstatement cases, it is not typically one of the primary requirements.
- C) A new incontestable period might apply but is not a key requirement for reinstatement.
- D) A reduction in coverage is not a standard part of reinstatement; it would depend on the insurer’s rules or the policy’s provisions.