What Is a Waiver Of Restoration Premium?

The term waiver of restoration premium refers to a clause in an insurance policy that relates to the continuation of coverage when the policy has already paid out an insurance claim. As such, the insurance company doesn't require the policyholder to pay a fee to continue receiving coverage. Waivers of this kind are generally found in liability policies.

How Waivers of Restoration Premium Work

Some insurance companies require policyholders to pay a fee to continue coverage after they've paid out a claim. This is known as a restoration premium. Some companies may charge insured parties a higher rate in order to provide them with continued coverage under the same terms. Some insurers may continue coverage without requiring a fee. This is known as a waiver of restoration premium.

You may still be able to maintain the same level of coverage you first had without this clause in your insurance contract, but the insurer may require you to pay an additional premium.

Insured parties who want a policy with a waiver of restoration premium—one that doesn't require them to pay a fee to get continued coverage—should read make sure there is a clause included in their contract. When a wavier of restoration premium is included in an insurance policy, the policyholder may be able to make claims that the insurance company pays out. After payment, the insurance company keeps up with the same coverage as the policy originally provided.

Key Takeaways

  • A waiver of restoration premium is a clause in an insurance policy that allows the policyholder to receive continued coverage even after the insurer pays out a claim.
  • Coverage under these waivers is the same as before any claims are paid.
  • Waivers of this kind are generally found in liability policies and are generally noted in insurance contracts.

As noted above, waivers of restoration premium are commonly found in liability insurance policies such as the automotive and health insurance segments of the industry.

Special Considerations

Even if the insurance company actually imposes an additional charge or increased premium to resume or coverage, this may be the most practical option for the insured party. It can often be more difficult to obtain coverage through a new insurance company when there has already been a recent claim submitted on behalf of the insured individual or property. Insurance companies may also charge a higher premium for new customers or policies. Sticking with the current insurance company, even with the additional premium, is often the option that makes the most sense from an economic standpoint.

In the case of an incident that results in a relatively minor loss or expense, it may sometimes be a smart strategy for an insured party to simply pay the costs out of pocket instead of submitting it as a claim to the insurance company. This is due to the possibility of an increased premium that might be triggered by a claim.

Insurance companies often reassess the premiums for a policy, or the decision of whether to continue to maintain the policy at all, after a claim has been made. They may also reevaluate a policy on an annual basis or at certain intervals or milestones. At these points, the insurance company has the option to take action to renew, continue, or terminate the policy.

On the other hand, coverage can also come to an end through more passive means. The policy may simply become exhausted once the policy limits are reached. Insurance policies have a maximum amount that they will pay for both individual incidents and as a cumulative total over the life of the policy. If restoring an insurance policy is not an option, the insured may want to purchase secondary policies that can go into effect if the primary policy becomes exhausted.