Accept premium on lapsed policy but not fully reinstate?

So a policy has lapsed to ETI or RPU and then the policy holder sends in a number of months of premium but the amount sent in would not fully reinstate the policy. Meaning the policy would either be in the grace period or actually beyond the grace period so that the admin system would immediately or very quickly put the policy back to ETI or RPU status with a greater value (either longer term or higher reduced face).

Should the company accept the premium? Or should the company return the premium stating that it was not enough to reinstate the policy?

What does the policy form say about reinstating the policy?


i would return it, as accepting it puts you in a precarious position.

you have the choice to reinstate, if it comes in late, but you need to control the timing

Timing-wise I would expect the transition to ETI or RPU to be slightly longer than the contractual grace period. Reinstatement periods are generally longer, but need EOI. Assuming the EOI was not required (or was provided and was good), and the money was received in the company’s established reinstatement period, reinstate and let nature take its course.
If this is a large increase in NAR, and asking for EOI is permitted, ask for EOI. If there is an agent relationship, tell agent the $ wasn’t enough to reinstate to premium-paying and see if you get another check.

Yeah, it is a final expense product with 2 varieties, one with a limited benefit of 110% of premiums for the first 2 years or a first day coverage policy. Because there is a lot of quick reinstatements we have an internal policy of waiving EOI (and interest) for the first few months. The big one that bothers me is when a limited benefit policy gets to its 2nd anniversary and the db for ETI goes from the 110% of premium to full benefit.

I’m just wondering if anyone else sees this. I tried to get it changed once with no luck.

Well, the higher eti ben does cause the eti to expire sooner, and the same ben increase occurs at 2 years regardless of prem paying or on eti.

I have another couple more question about ETI for y’all.

When reporting in the annual statement, would you consider a policy on ETI as a Term policy?

When the policy goes ETI, you are basically taking the CV and using it to purchase a “new” benefit. Would you count that as surrender value and premium in your financial statements?

Yes a term policy, no to csv as premium. Same contract, terms are described as a non4 option in original contract. Do you count rpu as premium?

The way the admin system works it surrenders the policy and takes the CV and uses that to calculate the ETI benefit or RPU benefit (via commutation functions) then applies the CV as premium to “Purchase” the new benefit. Had they asked me, I would have said, that is fine just put those amounts to dummy GL accounts or into GL accounts that don’t go into the financials. But that wasn’t what was done. They are working on fixing that. To make matters worse, since the money went into a premium account it was aggregated into the split by state to pay premium taxes. :rofl:

Wow, that’s a lot of work for no good reason. Too smart by half.

I had to build an ETI calculator yesterday and used commutation functions because they are the easiest way to do this.

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