<p>This paper examines whether adverse selection exists in decisions by policyholders who allow their policies to lapse and then reinstate them, respectively. We find that lapse policies have lower pre-lapse claim experience than those that are continuouslyin-force, indicating that policies with lower risk are more likely to lapse. This result implies that lapse decisions are subject to adverse selection/retention. Because policies reinstated after six months are subject to limited underwriting, we separated reinstated policies into two groups: those reinstated within six months group and those reinstated after six months group. The evidence shows that reinstated policies both have higher subsequent claim probability than those that are continuously-in-force. These results imply that reinstatement decisions are subject to adverse selection. Finally, we also find that the longer the policy lapse prior to reinstatement, the higher the claim probability. This observation is consistent with continued negative health shock/changes being experienced by some individuals following the six-month period after lapsation.</p>