Reinstatement of cover after lapse

Purpose

If a premium due remains unpaid despite a reminder, the life insurer’s obligation to pay a benefit is suspended or lapses. Reinstatement gives the life insured the opportunity to revive the original cover by paying the overdue premium together with interest and costs, rather than having to take out an entirely new policy with a fresh health assessment.

Effect and limits

Reinstatement is usually subject to a deadline within which the overdue payment must be made; once that period expires, the contract is treated as finally terminated, and reviving cover requires a new application together with a new risk assessment. Claims arising between the moment cover lapsed and the later payment are generally unaffected by reinstatement, since liability only revives from the point of payment itself and does not apply retroactively. Some insurers additionally require a fresh health declaration on late payment if a certain amount of time has passed since cover was suspended.

Negotiation and practice

In the event of temporary payment difficulties, the reinstatement deadline should always be observed, since taking out a new policy after it expires can be considerably more expensive, or no longer possible at all, particularly if health has deteriorated in the meantime. Customers with recurring cash-flow constraints should discuss alternative payment arrangements with the insurer, such as monthly rather than annual premiums, to avoid the policy lapsing again in the first place.

Reinstatement in Switzerland is anchored in Art. 21 VVG as a statutory two-month period from the end of the reminder period; if the overdue premium is subsequently demanded or accepted, the insurer’s liability revives from the moment of payment. In Germany and Austria, by contrast, the specific design of reinstatement stems primarily from the relevant insurers’ policy conditions.