Sum Insured is not free from all dangers. What happens to it? The question usually crops up into our mind as to what happens to the sum insured by successive payment of insurance claims . The position varies with regard to the type of insurance and this is considered below.
In Case of Marine Insurance : With regard to marine hull, the sum-insured remains as it is even though numbers of partial claims have been paid during the same period of insurance. In addition to payment of partial loss(es) there may be liability of total loss also. Unrepaired damage cannot be claimed in addition to total loss as no money was actually spent on repair. Reinstatement of the sum-insured is, therefore, not required. With regard to Cargo the proposition of claim question as to reinstatement of sum-insured is irrelevant. The claim is made once at the final destination and the policy comes to an end.
In Case of Fire Insurance: Payment of a loss diminishes the sum insured by the amount of claim payment and, therefore, if the property is restored, the sum insured shall be required to be reinstated for the remainder of the policy period by paying pro-rata premium. Otherwise, the policy remains for a reduced sum-insured due to successive claim payment.
In Case of Life Insurance: Claim occurs once only and the policy is given up, the question of reinstatement of the sum-insured does not arise.
In Case of Property insurance: Except motor, the position is exactly the same as with fire, i.e., reinstatement of the sum insured is required. With regard to motor the position is like marine hull, i.e., reinstatement is not required.
In Case of Liability insurance: Reinstatement of the sum-insured is not usually required, i. e, sum-insured is not reduced by successive claim payments, unless of course there is a limit of total amount payable during the period of insurance.
In Case of Personal accident insurance: Like life insurance, reinstatement of the sum insured is no consideration in Personal accident insurance.