Reinstatement
Reinstatement in insurance has two meanings: restoring insured property to its pre-loss condition as a claims settlement method, and reinstating a lapsed policy. Both meanings are important for policyholders — the first affects how a claim is settled; the second affects whether cover continues.
Two meanings of reinstatement
1
Claims reinstatement
The insurer repairs or rebuilds the damaged property instead of paying a cash sum. For buildings insurance, this means restoring the structure to its pre-loss condition. The insurer either manages the repair directly or pays the cost of reinstatement to a contractor chosen by the policyholder.
2
Policy reinstatement
Reactivating a lapsed policy by paying overdue premiums within the insurer's reinstatement window. Cover is reinstated from the payment date — not backdated. Losses during the lapse period are not covered.
Reinstatement as a claims settlement basis
When an insurer settles a property claim on a "reinstatement basis," they commit to restoring the property to its pre-loss condition using materials of equivalent quality — not improved quality. If the property was 20 years old, reinstatement replaces like-for-like, not with new materials throughout.
Crucially, the sum insured for buildings cover should reflect the reinstatement (rebuild) cost, not the market value of the property. These are very different figures — particularly in areas where land value forms a large part of the market price. If the rebuild cost is £250,000 but the property is insured for £180,000, the policy is under-insured and the claim may be reduced proportionately. See under-insurance and our article on home rebuild costs.
For the sum insured concept more broadly, see sum insured. For reinstatement of the policy after a lapse, see the FAQ below.
Reinstatement FAQ
Frequently asked questions
- Not necessarily. Reinstatement returns the property to its pre-loss condition, which is often the right outcome for buildings claims. But cash settlements give the policyholder flexibility — they may prefer to use the funds differently, particularly if the property is being sold or if the cost of reinstatement exceeds the market value uplift. Some policies give the insurer the option to reinstate rather than pay cash; others give the policyholder the choice. Check your policy wording. For the sum insured basis, see sum insured.
- A "new for old" or "reinstatement as new" clause means the insurer replaces or repairs the item without deducting for wear and tear or depreciation. This is standard on most modern home contents policies. Without this clause, the insurer applies a depreciation deduction — a five-year-old television is worth less than a new one, and the settlement reflects that. Check whether your policy settles on a "new for old" or "indemnity" basis, as this significantly affects the claim value for older items.
- If a policy lapses due to non-payment, the insurer may offer a reinstatement window — typically 30 to 60 days — during which the policy can be reactivated by paying the outstanding premium. During the lapse period, cover is not in force. For life insurance specifically, a policy lapse means there is no death benefit; reinstatement after the grace period may require a new health declaration. Prompt payment on reinstatement restores cover; it does not backdate cover for losses during the lapse period.