What does "reactivating a lapsed policy" refer to in life insurance?

What does "reactivating a lapsed policy" refer to in life insurance?

• A. The process of renewing a policy with new terms
• B. The process of reinstating a previously terminated policy due to unpaid premiums
• C. The process of converting a term policy to a permanent policy
• D. The process of modifying existing policy limits

Answer: (B)

Reactivating a lapsed policy specifically refers to the process of reinstating a previously terminated policy that was not maintained due to unpaid premiums. Life insurance policies can lapse when the premium payments are not received by the insurer for a certain period, typically after a grace period. In such cases, the policyholder has the opportunity to reactivate the policy, usually by paying the overdue premiums and possibly meeting certain conditions stipulated by the insurer, such as providing evidence of insurability. This process is critical because it allows the policyholder to regain the benefits of the insurance coverage that were lost due to non-payment. Reactivation is often preferred by policyholders who wish to avoid the challenges of applying for a new policy, which might involve higher premiums or a new assessment of health risks.

Reactivating a lapsed policy specifically refers to the process of reinstating a previously terminated policy that was not maintained due to unpaid premiums. Life insurance policies can lapse when the premium payments are not received by the insurer for a certain period, typically after a grace period. In such cases, the policyholder has the opportunity to reactivate the policy, usually by paying the overdue premiums and possibly meeting certain conditions stipulated by the insurer, such as providing evidence of insurability.

This process is critical because it allows the policyholder to regain the benefits of the insurance coverage that were lost due to non-payment. Reactivation is often preferred by policyholders who wish to avoid the challenges of applying for a new policy, which might involve higher premiums or a new assessment of health risks.