Final answer:
Coverage for losses caused by accident begins as specified in the reinstated policy terms, either immediately or after a waiting period. Policyholders need to understand the coinsurance clause in their policies and the specifics about when the coverage pays out.
Step-by-step explanation:
When a company decides to reinstate a policy, coverage for losses caused by accident would typically begin as specified in the policy terms, which could be immediately upon reinstatement or after a waiting period as defined by the insurance agreement.
It is crucial for policyholders to understand the details of their coinsurance clause, as this involves a shared financial responsibility between the policyholder and the insurance company where the policyholder pays a percentage of a loss, and the insurance company covers the remaining cost. The reinstatement terms should clearly state when the coverage is effective for various scenarios such as when medical expenses are incurred, when the policyholder dies, when a car is damaged, stolen, or causes damage to others, and when a dwelling is damaged or burglarized.
Policyholders should be aware of these details to avoid unexpected out-of-pocket expenses or lapses in coverage. If an insurance company increases its premiums to cover the losses from high-risk individuals, it might deter people with lower risks from maintaining their policies, thus affecting the overall risk pool and pricing structure.