Which statement about reinstatement provisions is correct?

• A. This right is valuable to both policyowner and insurer.
• B. This right is commonly granted after surrender for cash value.
• C. Reinstatement is allowed even after surrender in all cases.
• D. Reinstatement rights apply only to new policies.

Answer: (A)

Reinstatement provisions allow a lapsed life insurance policy to be revived if the policyholder meets certain conditions (usually paying past due premiums with interest, repaying any outstanding loan, and providing evidence of insurability) within a specified period. The idea is to restore the original contract rather than issue a new policy.

This right is best because it benefits both sides. The policyowner gains continued life protection without going through underwriting for a new policy, and the insurer benefits by preserving the in-force risk, collecting premiums again, and avoiding the additional lapse exposures that can come with replacing the policy.

It’s not granted after surrender for cash value, since surrender terminates the contract and ends the policy’s protections. Reinstatement isn’t automatic in all cases after surrender, and it does not apply only to new policies—the provision exists for existing policies that have lapsed, not exclusively to new ones.