December 19, 2024
Benefits of Reinstating a Life Insurance Policy
Four reasons why it makes sense.
Life insurance plays an important role in securing your clients financial futures. Yet, policies can lapse for many reasons, from financial difficulties to simple oversight. When life insurance policies lapse, it can create financial uncertainty for policyowners and their beneficiaries.
Reinstating a policy has numerous benefits.
- Preserving Original Benefits
Reinstating a lapsed policy can maintain the original terms and benefits. Reinstatement often allows clients to keep their original premiums, coverage amount, and policy provisions—terms that may no longer be available with a new policy due to changes in age, or health. This is particularly valuable for clients who initially secured favorable rates due to their health or lifestyle. - Avoiding Higher Costs
Clients may need to purchase a new policy, often at significantly higher premiums. A client has aged and may have developed health conditions, which could lead to increased costs or difficulty obtaining new coverage. Reinstatement can help them avoid the financial burden of starting over. - Restoring Financial Security
Reinstating a policy ensures that the peace of mind life insurance provides to clients and their beneficiaries stays in place. It’s an opportunity for clients to realign with their long-term financial goals. - Avoiding Tax Consequences
In certain situations, the lapse or surrender of a life insurance policy can create tax liabilities, especially if the cash value exceeds the premiums paid or there are outstanding loans on the policy. Reinstating a policy can help clients avoid these potential tax consequences.
How to Reinstate a Policy at NLG
Requirements vary by policy and require a Home Office quote for specifics. Use state specific forms where applicable. Email Contractchange@nationallife.com for a quote.
Forms that are always required:
- Policy Change Form 1441. Complete:
– Part A – all questions
– Part B – question 7 (check #7 – Reinstatement)
– Part E – provide the date of the scheduled Paramedical Exam
– Part G – date, city, and state and signatures
- Policy Change Supplement to the Application Form 20114. Complete all sections of the form.
- HIPPA Compliant Authorization Consent Form 8164. Complete:
– Signature, printed name, current date and birthdate
- HIV Consent Form 1443
- Reinstatement Charges Due
Potential Additional Requirements, Exams, and Labs:
- Financial Questionnaire Form 1392. Complete all sections. (if in NY)
- Current Medical Records – will be ordered by Home Office (if insured is 70+)
- Paramedical Exam, Blood Chemical Profile, Urinalysis, EKG done by an Approved Paramed Provider
NLG uses third party reports and reserves the right to ask for additional information once the After Issue Underwriting team reviews the initial requirements and reports.
