What to do when policy lapses: Reinstatement Process

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The Principle of Utmost Good Faith in Insurance and Section 45 of the Insurance Act

Insurance is a contract of utmost good faith, where the insurance company accepts the risk on your life based on the details given in the proposal form. These declarations are accepted in utmost good faith by insurance companies, and they promise to pay the claim in case the insured event, i.e., death, happens.

However, if death occurs within 3 years of policy commencement, then Section 45 of the Insurance Act applies, and it is the duty of the insurance company to investigate such cases with the purpose of finding out if all correct declarations were made in the proposal form.

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Renewing and Reinstating Insurance Contracts

Insurance is also a renewable contract where the insured promises to pay a renewal premium as per the agreed terms. Premium can be paid in monthly, quarterly, half-yearly, or annual mode. If you have chosen a monthly mode, then you are allowed a 15-day grace period to pay the premium; in all other modes, a 30-day grace period is allowed. Hence, it is necessary that the renewal premium is paid within the grace period because the contract lapses after the grace period.

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This lapsed contract can be reinstated within 6 months or as per the policy of the insurance company. However, there is a process of reinstatement as detailed below:

  • Visit the local branch or apply for online reinstatement.
  • Insurance companies demand a declaration that there has not been any change in your health and habits. Once again, all declarations are important and should be done with honesty.
  • Post-reinstatement, the contract once again becomes valid as a new contract, and Section 45 becomes applicable, which means that all claims will be investigated if the insured event occurs within 36 months of reinstatement.

This clearly means that insured people have a risk of claim rejection every time they go for reinstatement. All renewal premiums must be paid on time to sustain the validity of the contract.

Please note that a valid contract guarantees a claim after 36 months of policy commencement or reinstatement as per the provisions of Section 45.

The suicide clause, i.e., death due to suicide, is not acceptable within 12 months of a new contract or reinstatement.

Reinstatement Process


Avoid reinstatement by paying the renewal premium on time and follow the guidelines in case you need to go for reinstatement:

  • Ensure that you fill out the declaration form.
  • Make all honest declarations; do not take it casually.
  • Take your self-medical at the time of reinstatement and keep it in your record.

Insurance is a good habit because it tells your loved ones that you are a responsible person and continue with the habit.

In case of any questions on reinstatement and claims post-reinstatement, reach out to Insurance Samadhan. We are there to help you.

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Also Read:  Smoother Claims, Quicker Settlements: Your Path to Success with Insurance Samadhan

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