Policy Reinstatement After a Lapse: Rules, Costs & LLQP Answers
Reinstatement is the process of putting a lapsed life insurance policy back into full force, normally available for up to two years after the lapse under provincial insurance law.
Why it matters on the LLQP exam
Reinstatement questions are really a checklist question. To reinstate, the owner must typically provide all of the following:
- A written application for reinstatement within the allowed period
- Satisfactory evidence of insurability — the insured's health must still qualify
- Payment of all overdue premiums with interest
- Repayment or reinstatement of any outstanding policy loan
Why bother reinstating instead of buying a new policy? Two big reasons the exam expects you to know: the reinstated policy keeps its original premium rate (based on the insured's age at issue, not their current age), and it keeps its original terms and riders. A new policy at an older age almost always costs more.
The trap that catches most candidates: certain time periods restart on reinstatement. The two-year incontestability period runs again from the reinstatement date, and so does the two-year suicide clause exclusion. The exam will bury a reinstatement inside a question and test whether you reset those clocks.
Example question
Elena let her whole life policy lapse 18 months ago. She now wants it back rather than applying for new coverage. Which of the following will the insurer require?
- Only the overdue premiums, with no health questions
- Evidence of insurability plus overdue premiums with interest
- A brand-new medical exam and a new two-year suicide clause waiver
- Nothing — reinstatement is automatic within two years
Answer: B — reinstatement requires proof the insured is still insurable, plus back premiums with interest and any loan settlement.
Reinstatement only becomes necessary once the grace period has expired; both provisions sit within the contract framework covered in the life insurance and taxation hub.