Many insurance companies are changing their guidelines for policy reinstatements. When a policy is set up for monthly installments the insurance company will cancel the policy after the grace period due to non-payment of premium. Although the insured will not have coverage after the cancelation date many companies are offering to reinstate the same policy term rather than having the client purchase a new policy.
There are a few ways that a policy can be reinstated. With some carriers the insured can make a payment and reinstate the policy with a lapse in coverage. This means that the policy would not have had any coverage from the date that it had cancelled until the reinstatement date. Most companies will provide coverage effective the date after the payment is made in order to reduce fraud. This way the insured cannot get into an accident then reinstate the policy and request that the insurance company pay for the claim.
Other insurance companies offer what is known as a reinstatement without a lapse in coverage. This means that the policy will be reinstated back to the original date of cancelation. Most companies that offer this type of reinstatement will have a restricted amount of time that the insured can reinstate and will also require that there have not been any losses. They often require that the insured sign a statement of no loss.
In this case the insured is responsible for the entire premium that would have been charged during the cancelation period since the policy is reinstated with no lapse. The insurance company will not pay for any losses during this time frame as well. In short the insured is paying for coverage for a period that they could not use the insurance coverage.