Definition
Reinstatement Value
Reinstatement value cover pays the full cost of repairing or replacing damaged property with new, without deducting depreciation.
Under a reinstatement basis, a fire or property policy settles claims at the cost to rebuild or replace the asset as new, rather than at its depreciated market value, provided the property is actually reinstated. This is more generous than indemnity-only settlement and is the basis used in products like Bharat Griha Raksha for the structure.
The trade-off is that the sum insured must reflect full rebuilding cost to avoid the average clause, and the insured must complete the reinstatement to claim the full amount. It is the property equivalent of motor 'zero depreciation' in spirit.
Related terms
- Indemnity PrincipleThe principle of indemnity ensures an insured is restored to their pre-loss financial position but cannot profit from a claim, applying to general insurance.
- Bharat Griha RakshaBharat Griha Raksha is IRDAI's standardised home insurance product covering the building and contents against fire and allied perils.
- Average ClauseThe average clause is a condition in property insurance that reduces a claim proportionately if the asset is underinsured at the time of loss.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.