Texas Life Agent Practice Exam

If a life insurance policy lapsed last year and the insured wants to reinstate it, which provision applies?

1. Renewal Provision

2. Reinstatement

3. Grace Period

4. Conversion Option

The correct answer is: Reinstatement

When a life insurance policy has lapsed, reinstating the policy allows the insured to regain their coverage under specific conditions outlined in the policy's terms. The Reinstatement provision is specifically designed to address situations where a policyholder seeks to restore a lapsed policy. Typically, this provision will have certain requirements that the policyholder must meet for reinstatement to be approved. These requirements often include submitting proof of insurability, paying any overdue premiums, and, in some cases, providing evidence that the insured has not experienced a significant change in health since the policy lapsed. Understanding this provision is crucial for agents and policyholders alike, as it not only gives a route to regain coverage but also sets limitations regarding the timeline and conditions under which a policy may be reinstated. In contrast, the other options relate to different aspects of life insurance. The Renewal Provision applies to policies that can be renewed at the end of their term, the Grace Period is the time allowed after the premium due date in which the policy will remain in force, and the Conversion Option refers to the ability to convert a term policy into a permanent policy. While these provisions play important roles in life insurance policies, they do not specifically address the reinstatement of a lapsed policy.