An insured applies to reinstate a lapsed New York life policy two years after the default, and the insurer demands interest on the overdue premiums. What is the maximum interest the policy may charge?

Why B is correct

Under N.Y. Ins. Law §3203(a)(10), reinstatement requires payment of all overdue premiums with interest not exceeding 6% per annum compounded annually. That statutory ceiling limits what the insurer may charge for the arrears, and interest is expressly contemplated by the provision - it is not prohibited. Because this request was made within the 3-year window, the insurer may reinstate but cannot exceed the interest cap.

Why the other options are wrong

• A) Interest is expressly contemplated by §3203(a)(10), which caps it at 6% per annum compounded annually; it is not prohibited.
• C) The statute permits interest not exceeding 6% per annum compounded annually; a simple-interest-only reading misstates the permitted method.
• D) There is a statutory ceiling - 6% per annum compounded annually - so the insurer cannot charge any rate it chooses.

Memory hook

Reinstatement interest tops out at 6%, compounded annually.