insurance

Waiver of Restoration

A clause in insurance policies that allows an insured to waive their right to restore coverage limits after a claim has been paid. This means the policy limit remains reduced by the amount of any claims paid during the policy period.

Example

“After the hurricane damage claim, John signed a waiver of restoration to keep his premiums lower, accepting that his remaining coverage would be reduced for the rest of the policy year.”

Memory Tip

Think 'Wave goodbye to getting your full coverage back' - you're waving away the restoration of your original policy limits.

Why It Matters

This provision can significantly impact your financial protection after filing a claim, as it leaves you with reduced coverage for the remainder of your policy period. Understanding this clause helps you make informed decisions about whether to accept lower premiums in exchange for potentially inadequate coverage after a loss.

Common Misconception

Many people assume their insurance coverage automatically returns to full limits after a claim is settled. In reality, with a waiver of restoration clause, your coverage stays reduced, potentially leaving you underinsured if another loss occurs during the same policy period.

In Practice

Sarah has a $500,000 homeowners policy with a waiver of restoration clause. When a kitchen fire causes $100,000 in damage, her insurer pays the claim but her coverage limit drops to $400,000 for the remaining 8 months of her policy. If another incident occurs, she only has $400,000 in coverage available, not the original $500,000. Without this waiver, her coverage would have been restored to the full $500,000 after the claim payment.

Etymology

From legal terminology combining 'waiver' (voluntarily giving up a right) and 'restoration' (returning something to its original state), first used in insurance contracts in the mid-20th century.

Common Misspellings

waiver of resotrationwaiver of restorationwaiver or restorationwaver of restoration

Related Terms

Aggregate Limit deductible

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