Elaine is a Marketing Associate at ILSA, a ReSource Pro company
What is a lapsed license?
The term “lapsed” refers to an insurance license that the holder does not renew at the time of its expiration date, but which state regulators have yet to administratively terminate. Unless the licensee no longer wants to solicit or transact business in the state, they need to act quickly to reinstate the license. On the other hand, if the licensee truly doesn’t need the license any longer, they should surrender it rather than allow it to lapse.
What to keep in mind when it comes to lapsed licenses
Here are a few tips for dealing with a lapsed license:
- Many states offer a “grace period” for late renewals. The availability and duration of this grace period vary from state to state. One year is the most common timeframe. Additionally, the licensee’s residence status and type of license may influence the availability.
- Late renewals typically incur extra fees. Depending on the state, these can be substantial.
- Late renewals frequently cannot be submitted electronically. Using paper application forms can significantly increase the processing time.
- If the grace period has lapsed, the licensee will need to re-apply. Depending on the amount of time elapsed, residents may need to re-take a licensing exam.
- Some states also require written disclosure of any business conducted during the time the license lapsed. If a licensee solicited, negotiated, or contracted policies under a lapsed license, it can result in fines or administrative actions.
- Allowing a resident license to lapse can jeopardize all non-resident licenses granted reciprocally. This can lead to a cascade of regulatory issues.
- If a designated producer’s license lapses, the agency’s license in that jurisdiction may be administratively terminated. Reinstating such a license often involves higher fees and more processing time than one for an individual.
Need help managing license renewals? ILSA tracks upcoming deadlines and automatically renews licenses unless instructed otherwise. Contact us to create a customized compliance solution.
This blog was first published on the ILSA website.