What happens when restoration occurs in an insurance policy?

When restoration occurs in an insurance policy, coverage is restored with new limits. This process typically happens after a loss has been covered under the policy, and the insurer reinstates coverage to address future incidents. The new limits might reflect current values, changes in risk, or adjustments based on endorsements that have been applied to the policy.

This means that although a claim may have been made and paid out, the policyholder can continue to have protection or coverage going forward, which can be crucial for ongoing risk management. Restoration is an important aspect of ensuring that policyholders remain protected without having to purchase a new policy entirely.

In contrast, other choices imply outcomes that would not typically occur in a restoration context. Coverage being permanently canceled or becoming void suggests a loss of protection that is contrary to the purpose of restoration. Meanwhile, having coverage increased indefinitely is not standard, as insurance policies usually have specific limits established, making realistic adjustments or new limits more appropriate than unlimited coverage.