A New Jersey life policy lapsed for nonpayment of premium, and the policyowner now seeks reinstatement after 4 years have passed since the lapse. Which statement correctly applies the reinstatement rule to this situation?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
New Jersey's reinstatement framework (N.J.S.A. 17B:25-9) preserves a lapsed policy only within 3 years of the lapse, and even then reinstatement requires evidence of insurability to the insurer's satisfaction plus payment of arrears with interest. Statements made in a reinstatement application take on a fresh contestable period of their own. A lapse of 4 years falls outside the window, so the insurer may treat the old policy as closed and require a wholly new application. The New Jersey Department of Banking and Insurance supervises how insurers apply these reinstatement standards.
Why the other options are wrong
- A) Reinstatement within the window is conditional on evidence of insurability and arrears; it is never automatic, and the window has closed here anyway.
- C) No premium-multiplier device exists in the reinstatement rule; the issue is the 3-year limit, which 4 years has exceeded.
- D) Improved health is irrelevant; the governing facts are the 3-year window, proof of insurability, and payment of arrears with interest.
Memory hook
Three years to revive a lapsed policy — at four, start over with a fresh application.