What is a 'Waiver Of Restoration Premium '

Waiver of restoration premium is a section of an insurance policy that relates to continuation of coverage with a policy that has already paid out a claim.

BREAKING DOWN 'Waiver Of Restoration Premium '

Waiver of restoration premium says that the insurance company will not require the policyholder to pay a fee to resume coverage at the same level which was in effect previously, and which their policy initially provided before any claims were paid out. In the absence of this clause, the customer may still be able to maintain the same level of coverage, but the insurer may require the covered party to pay an additional premium.

Even if the insurance company does impose an additional charge or increased premium to resume or continue 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 also may charge a higher premium for new customers or policies. In this case, sticking with the current insurance company, even with the additional premium, may be the option that makes the most sense economically

Financial Implications of Waiver of Restoration Premium

In the case of an incident that results in 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 have been 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.
 

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