State RegulationsMA specificDifficulty 2/5
A client asks why he should pursue reinstatement rather than a new policy after a lapse in Massachusetts. Which is the most accurate advice under M.G.L. c. 175, § 132(11)?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
M.G.L. c. 175, § 132(11) makes reinstatement the revival of the existing policy on its original terms, available when the insurer accepts the evidence of insurability and the policyowner pays the overdue premiums with interest. Compared with a new policy — underwritten at the insured's current age and health — reinstatement can preserve the original contract's economics, but it is not free or automatic: the health question returns and the arrears must be paid. Framing both the benefit and the burden is the accurate advice.
Why the other options are wrong
- A) Reinstatement is conditional — the statute requires evidence of insurability and payment of the arrears with interest, so availability is never unlimited.
- B) No statutory surcharge attaches to reinstatement under M.G.L. c. 175, § 132(11); the cost is the arrears with interest, and a new policy may well cost more at a higher attained age.
- C) The reverse is true: reinstatement under M.G.L. c. 175, § 132(11) requires evidence of insurability, just as new-issue underwriting does.
Memory hook
Old policy, old price, but the health question returns — that is the reinstatement trade-off.