What is the Difference Between Life Insurance Reinstatement and Revival?

Life insurance policies are long term contracts involving the life insurance company and the policyholders. The payment of the premium is spread over the premium paying term which is designated by the purchased policy.

Even though options exist to allow policyholders to reinstate or revive their policies, it is never a good idea to even let it reach that state. Do not rely on a grace period or the fact that you can still take care of it after several months. If you purchase a policy, it should be one that you can comfortably afford.

What is life insurance reinstatement?
Before the paying term is over, the policyholder should be able to pay for the premium. Fortunately, insurance companies provide grace periods for the payment. However, if the premium is not paid within the effective time, the policy lapses from what we call the First Unpaid Premium, or FUP.

Basically, your insurance company will consider your policy as ‘lapsed’ in the event that you’re not able to make the premium payment on the designated due date. Grace periods, which are typically 30-day timeframes that come after the due date, are provided by companies. If you are able to pay your premium within the grace period, then you have reinstated it. Reinstating your policy within the grace period avoids further repercussions and your contract won’t be terminated.

What is life insurance revival?
However, as mentioned before, not being able to pay within the grace period will cause the company to declare your insurance policy as ‘lapsed’. There is still a chance for the policyholder to revive his policy if the premiums have not been paid for only several months (though this would vary for different companies). This option would mostly be more available for policyholders who have been paying their premiums on time for many years. It’s possible that the company may charge interest when the circumstances call for it. For example, if the insurance policies have been in default for several months, then interest may be charged. Some companies will allow an individual to revive a policy that has been in default for five years, but as said before, insurance companies set different rules.

If the time that the policy has been in lapse is longer than necessary, then the insurance company may require to-date medical information from the policyholders. This would mean that the company wants to evaluate the level of risk that the policyholder presents before putting the policy back to its previous effectiveness.

In summary, how do they differ?
Due dates for paying the premiums exist, and so do grace periods which come afterwards. Being able to pay within the grace period will mean reinstating your policy, and it avoids termination and other consequences. If you were not able to pay within the grace period, the company will consider you policy as ‘lapsed’ and it will no longer be usable. After the grace period, in order to put the policy back in effect, you will have to revive it. Reviving it means taking care of the unpaid premiums in order to put the policy back in effect.