Automatic Reinstatement

What Does Automatic Reinstatement Mean?

Automatic reinstatement is an insurance policy provision that ensures the policy limit is restored after a claim is paid out. In other words, it reinstates the original coverage limit following the payment for a covered loss.

This provision may also be referred to as the maximum aggregate limit of indemnity.

Insuranceopedia Explains Automatic Reinstatement

For example, under a $100,000 homeowners insurance policy, if the insured experiences a covered loss of $40,000, the insurer will pay out the $40,000 claim. After this payment, the original policy limit of $100,000 is reinstated. This means the insured would still be covered for up to $100,000 for a new, unrelated claim, rather than only $60,000 for the remainder of the policy period. Since automatic reinstatement preserves the original limit you paid for, it matters when figuring out how much homeowners insurance you need in the first place.

A policy may allow for one or more reinstatements of the policy limit, but this is not a guaranteed feature. Therefore, it is important for a policyholder to thoroughly understand the full terms of their policy. Not every carrier handles reinstatement the same way, so it’s worth checking the fine print when comparing top-rated homeowners insurance companies.