Reinstatement Value Clause under Fire Insurance

The reinstatement value is a method of claim settlement in a fire insurance policy. With the reinstatement value clause, the insurance company pays the replacement cost of the damaged property to the policyholder. This allows the policyholder to replace the damaged property with a new one of the same type. This clause does not take depreciation or general wear and tear into account when settling claims. Since the insurer covers the cost of replacing the damaged property with a new one, this clause is also called the "New for Old" clause.