Reinstatement
The word reinstatement means to bring something back into use or force after it has been out of use. Reinstatement is used in a number of different scenarios in insurance.
Reinstatement of the sum insured: In this case we refer to the reinstatement or restoration of the sum insured after a loss or damage has reduced the value of the insured item.
Reinstatement option of claims settlement: This refers to the sole right of the insurer to restore or replace the lost or damaged property rather than making a financial payment to the insured. This is according to a special provision in the insurance contract. The insured can never insist on a financial payment instead of the repair of the damaged item, such as a car damaged in an accident. Where the insurer uses the reinstatement option it means that, in effect, he has agreed to a new contract.
Reinstatement value conditions: This is also known as the replacement cost. “New for old” cover is normally used in household insurance instead of the market value (as is normally the case in car insurance.)
Reinstatement of a cancelled policy: Should a cancelled policy be repaired to its full force after cancellation, the term reinstatement is also used. It could have been cancelled due to the insured not making the agreed insurance premiums on the due date. Companies may require evidence of insurability and signing of a no-loss declaration as well as payment of a re-instatement fee before agreeing to reinstate the policy.