Reinstatement

Reviewed by Stefan Tirschler

Noun

re·in·state·ment | ˌriːənˈsteɪtmənt

Definition: Resuming the active status of an insurance policy that had previously lapsed.

Mary was happy about the reinstatement of her policy after she addressed the underwriter’s concerns.

What is reinstatement?

When you buy a home insurance policy, most typically the policy will be active for a period of one year. Sometimes, however, something happens during that year that causes the policy’s coverage to stop.

If a policy’s coverage stops in the middle of the policy term, we would say that the policy’s coverage was cancelled. If the coverage resumes later, the resumption is known as reinstatement.

Insurance coverage can be cancelled in the middle of the policy term for several reasons:

  • Non-payment of premiums. If an insurance customer doesn’t pay their insurance premiums, eventually their insurance provider will cancel their policy. Some insurers may offer customers a chance to reinstate the policy if they catch up on their missed payments.

  • Material change in risk. A “material change in risk” means a significant change to the insured home, one that’s large enough for the insurance company to revaluate whether or not they wish to continue coverage. For example, if you suddenly decide to open a home-based fireworks store or you change the occupancy of your home, your home insurer may cancel your coverage due to the increased risk.

  • Too many claims. If a customer makes too many claims in too short a time, their insurer may cancel coverage.

These are only examples, and not all would be candidates for reinstatement. Often, an insurance company would issue an entirely new policy instead of resuming the old one. The new policy might feature different premiums or more exclusions to address the issues that led to cancellation in the first place.

The important points

  • Reinstatement is when an insurance company re-starts the coverage of a policy that had lapsed.
  • There are many scenarios where a policy’s coverage might lapse, but not all of them are eligible for reinstatement.
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