reinstatement of the sum insured

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The payment of an additional premium to return the sum insured to its full level, after a claim has reduced it. Insurance policies are, in effect, a promise to pay money if a particular event occurs. If a claim is paid, the insurance is reduced by the claim amount (or if a total loss is paid, the policy is exhausted). If the policyholder wishes to return the cover to its full value, a premium representing the amount of cover used by the claim must be paid. In the case of a total loss the whole premium must be paid again.

Subjects: Financial Institutions and Services.

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