Renewal and Reinstatement Provisions in a Health Insurance Policy
UPDATED: June 19, 2018
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“Renewal: Subject to the right to terminate this policy upon non-payment of premium when due, the right to refuse renewal of this policy shall not be exercised before the renewal date occurring on, or after and nearest, each anniversary, or in the case of lapse and reinstatement, at the renewal date occurring on, or after and nearest, each anniversary of the last reinstatement. Any refusal of renewal shall be without prejudice to any claim originating while the policy is in force.”
There is one provision required by state law that applies only in certain circumstances. It is a Renewal provision and it applies only to policies in which the insurance company reserves the right to refuse to renew the policy on an individual basis when the policy would ordinarily automatically renew annually. This renewal provision may be a provision in the policy itself, may be an endorsement on the policy, or may be a rider attached to the policy. This wording must be a part of the legal contract in order for the insurance company to have this right of non-renewal.
Most individual health insurance policies are guaranteed renewable for the stated duration (e.g., until age 65) of the policy. In other words, the insurance company cannot cancel (refuse to renew) your policy as long as you continue to pay your premium on time. However, some individual health insurance polices are issued with wording that gives the insurance company the right to refuse to renew you individual policy on any policy anniversary. With regard to such a policy, state law requires the above renewal provision be included in the policy. This wording makes it clear that the insurance company may only refuse to renew on a policy anniversary (or, if applicable, on the reinstatement anniversary), and that any refusal to renew will not negatively impact any claims that originated beforethe termination date of the policy.
“If any renewal premium is not paid within the time granted the insured for payment [premium due date plus grace period], a subsequent acceptance of premium by the insurance company or by any agent duly authorized by the insurance company to accept such premium, without requiring in connection therewith an application for reinstatement, shall reinstate the policy; provided, however, that if the insurance company or such agent requires an application for reinstatement and issues a conditional receipt for the premium tendered, the policy will be reinstated upon approval of the application by the insurance company or, lacking such approval, upon the forty-fifth day following the date of the conditional receipt unless the insurance company has previously notified the insured in writing of its disapproval of the application. The reinstated policy shall cover only loss resulting from such accidental injury as may be sustained after the date of reinstatement and loss due to such sickness as may begin more than ten (10) days after that date. In all other respects the insured and the insurance company shall have the same rights as they had under the policy immediately before the due date of the defaulted premium, subject to the provisions of any rider which may be attached to the policy in connection with the reinstatement. Any premium accepted in connection with a reinstatement shall be applied to a period for which premium has not been previously paid, but not to any period more than sixty (60) days prior to the date of reinstatement.”
Another of the statutorily required provisions in individual health insurance policies is the Reinstatementprovision. This addresses what you can do if your policy lapses because you did not pay your premium when due or within the grace period. A typical provision
This lengthy provision provides an important benefit for you, the insured, because it allows you to again obtain insurance coverage that has lapsed, as long as you can provide evidence of insurability satisfactory to the insurance company – if the insurance company requires it. The reinstated coverage is usually issued at the same premium and under the same conditions as the original policy, although the insurance company does have the right to attach a rider to the policy that modifies the coverage in some way, usually limiting coverage based on new health history it discovers from the reinstatement application. Then it is your decision as to whether to accept it.
Although it is not required to be stated in the reinstatement provision, you ordinarily have 3 years from the date of policy lapse within which to apply for reinstatement.
*Wording may vary from contract to contract and from state to state.