What does the restoration/non-reduction of limits policy entail?

A restoration/non-reduction of limits policy ensures that the insured’s coverage limits are reinstated to their original amounts after a loss occurs. This type of policy is particularly beneficial because it allows the policyholder to maintain their financial protection without having to worry that their coverage limits will be diminished following a claim.

For example, if a policyholder has a coverage limit of $100,000 and faces a covered loss that costs $40,000 to resolve, under a restoration policy, the coverage would still be $100,000 after the claim is paid, rather than being reduced to $60,000. This guarantees that the insured can still fully benefit from the policy in the event of future claims within the same policy period.

In contrast, some policies might reduce the coverage limits after a claim, which could leave the policyholder underinsured in subsequent incidents. In a restoration/non-reduction policy, this concern is effectively addressed, providing greater peace of mind.