Reinstatement ***
- Pay back premiums
- Pay the interest on the back due premiums
- Prove insurability
- Pay back loans (if you had any)
- Can reinstate back 3 - 7 years
MR. WATSON: What happens if the policy lapses , if it collapses? Do you have coverage? You have no coverage. Look. At the end of the grace period if you still haven't paid it lapses.
MR. WATSON: Let's say I bought the policy when I was 25. It lapsed when I was 45. Now I'm 48. I want to reinstate it (See reinstatement ). "Reinstate" means put back like it never lapsed. I want to reinstate it at age 48. You understand my little story here? What four things do you think I must do to reinstate a lapsed policy? Think before you read the answer.
WOMAN: Pay the premiums up.
MR. WATSON: Pay back premiums. What has the company lost on those premiums?
ALL: Interest.
MR. WATSON: Interest.
WOMAN: So you have to pay interest from age 45 to 48.
MAN: Get another physical exam.
MR. WATSON: You must prove insurability. The company thinks something might be wrong with you. "Why did you let it lapse in the first place?"
MAN: Something is wrong with you.
MR. WATSON: And pay back loans. If there's not a loan, you wouldn't pay it back. You would only pay it back if there is one.
WOMAN: That's what I'm saying. So it's not an automatic four things if you haven't taken a loan out against your insurance.
MR. WATSON: Let's say I had a $100,000 policy with a cash value of $10,000. If I took a loan of $10,000 and then it lapsed, the insurance company gets paid back from the cash value.
MR. WATSON: If I want to reinstate it, I have to put that $10,000 back. What if I don't have that $10,000. I go to the bank: "I want to borrow $10,000." I use that to pay back the loan to reinstate my policy. As soon as my policy is reinstated, I take the loan against the policy and pay back the bank. You got it?
ALL: Yes.
WOMAN: So you borrow it back again after it's reinstated?
MR. WATSON: Yes, "Socrates," that's correct. It was a lot of wasted effort, but, there it is. So,
- pay back premiums,
- pay back interest,
- prove insurability, and
- pay back the loans.
- when reinstated, a new contestable period goes into affect
- when reinstated, the suicide clause does not begin again
MR. WATSON: You can go back as far as three years with one company, maybe seven years with the other company, each company sets its own limits. Go back how far? Three to seven years. Does that make sense?