Life Insurance Reinstatement Policy
Reinstatement is the term for making a life insurance policy active again after it has lapsed. This policy is issued to avoid the confect of indemnity. In other types of policies, only the market value of the damage or loss is indemnified but, this policy undertakes to reinstate the insured property lost by fire to new condition irrespective of its value at the time of loss.
So, if an insured person fails to pay the premium due to various circumstances and as a result, the insurance policy gets terminated, then the insurance coverage can be renewed. This process of putting the insurance policy back after a lapse is known as reinstatement. In other types of policies, in case of building or machinery, the actual loss is arrived, at by deducting the regular, depreciation from the original cost of it.
The amount of indemnity will be lesser than the amount to be spent in reinstating the property destroyed or damaged. In order to provide full coverage, “reinstatement or replacement” policies are issued.
Under this policy, the basis of settlement in the event of destruction is the cost of rebuilding the premises or in case of plant and machinery, the placement is done by similar machinery. The reinstatement of the damaged property indicates the meaning of repair of the damages.
The restoration of the damaged portion of the property to a condition substantially the same is but not better or more extensive than its condition, at the time of its renovation. The cost of the property when partially destroyed will not be more than till cost which would have been insured if such a property has been totally destroyed.
The payment of the actual expenditure on replacement will not be made until the expenditure has actually been incurred. This policy is also called ‘New for Old’ policy because the old property is replaced by new properties.
However, such, polities are issued only on building, plant, and machinery. This policy is not issued on stock, merchandise or materials. Each item of the insured property is subject to average.
The policy provides the definite amount in case of purchases of new property in place of the old Property destroyed. The reinstatement Policy stipulates that reinstatement must be carried out by the insured in order to obtain, the special basis of a settlement agreed.
The reinstatement must be commenced and carried out with reasonable dispatch and in any case must be complete within months after the destruction or damage or until reinstatement carried out and expenditure, incurred, the liability under the policy remain on the normal indemnity basis.