Disability Insurance Lapse
Aug 13, 2023
Jamie Fleischner

Jamie Fleischner

13 Aug, 2023

What happens when a disability policy lapses and you try to reinstate and are declined for medical reasons?

If you miss paying your disability insurance policy, you have a 30 day grace period. If you miss that payment, the policy will lapse or cancel. You have a six month period where you may request to reinstate the policy. This means you can go through the medical underwriting process to resume the policy payments and taking over the original policy benefits and pay premiums based on the original policy date.
To avoid lapsing your policy, make sure you notify the company if you change your bank account or address. It’s best to keep your policy on an automatic draft to avoid lapsing.
However, if you have had an adverse change in health, there is a chance that your reinstatement may be denied or modified. Here are some possibilities or what may happen:
  1. No Reinstatement: If you’re declined for medical reasons, the insurance company may not allow you to reinstate the policy. This means that you won’t be able to regain coverage under the original policy, and you’ll need to explore other options for disability coverage if you still require it.
  2. Limited Reinstatement: Some insurance companies might offer a limited reinstatement option. This could involve reinstating the policy with certain restrictions or exclusions related to the pre-existing medical condition that led to the decline. The terms of such reinstatement will depend on the insurance company’s policies.
  3. Higher Premiums: If a reinstatement is offered, the insurance company might require you to pay higher premiums due to the increased risk associated with your medical condition. These higher premiums could make the policy less affordable or even financially impractical.
  4. Modified Coverage: In some cases, the insurance company might reinstate the policy but modify the coverage terms. This could involve reduced benefit amounts, longer waiting periods, or changes in the definition of disability.
  5. Underwriting Review: If you’re declined for reinstatement, you might have the opportunity to undergo an underwriting review again in the future, at a time when your medical condition has improved. If your health status improves, the insurance company might reconsider your application for reinstatement.
  6. Exploring Alternatives: If you’re unable to reinstate the lapsed policy, you might need to explore other disability insurance options. This could involve applying for coverage with a different insurance company or exploring government programs that provide disability benefits.

It’s important to carefully review the terms and conditions of your specific insurance policy and to communicate directly with your insurance broker to understand the options available to you in case your policy lapses and you’re declined for reinstatement due to medical reasons. Each insurance company has its own policies and procedures in place, so it’s recommended to seek guidance from a qualified insurance professional or agent who can provide you with accurate information based on your individual circumstances.

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