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

A It permits reinstatement within 10 years after a policy has lapsed.
B It provides for reinstatement of a policy regardless of the insured's health.
C It guarantees the reinstatement of a policy that has been surrendered for cash.
D It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.

1 Answer

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Final answer:

The reinstatement provision requires the policyowner to pay all overdue premiums with interest before the policy is reinstated, and is subject to conditions such as the insured's continued insurability.

Step-by-step explanation:

The correct statement about the reinstatement provision is that it requires the policyowner to pay all overdue premiums with interest before the policy is reinstated. Reinstatement provisions typically allow policyholders to reinstate a lapsed insurance policy within a certain period, usually 2-3 years, not 10 years. This process will generally require evidence that the insured person remains insurable, payment of overdue premiums with interest, and may also require repayment of any loans taken against the policy (if applicable).


It's important to note that the reinstatement is not guaranteed simply because a policy was surrendered for cash or if the insured's health has deteriorated since the policy lapsed. Insurance is a financial contract that pays out under specific conditions, such as when medical expenses are incurred, the policyholder dies, a car is damaged, stolen, or causes damage to others, or a dwelling is damaged or burglarized.


Moreover, for the insurance system to function, the premiums collected from policyholders over time must cover the claims, the operational costs of the insurance company, and allow for profits. Therefore, allowing reinstatement without consideration of these factors would undermine the insurance model.

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