Reinstatement cost is the cost which will be incurred on reconstructing the property which got damaged in either a fire or in any natural calamity.

As per standard regulations, reinstatement cost includes value of foundation and it doesn’t include land cost.

Reinstatement is important in the context of home insurance as it is one of the two ways of buying home insurance. The other being market value, or depreciated cost basis. In insurance, market value is similar to the value of your house after factoring in depreciation while reinstatement is the value of reconstructing the house.