Representation and warranty insurance has moved from novelty to default in the middle market. That does not mean it is always the right call.
RWI earns its premium when the seller cannot credibly stand behind an indemnity — a fund at the end of its life, a founder taking all cash off the table, or a seller group too fragmented to pursue. In those deals the policy replaces an escrow that would never have been collectible.
It earns less when the seller is a going concern with reputational skin in the game, when the diligence gaps sit in areas underwriters exclude anyway, or when the retention is large enough that most realistic claims fall below it.
Read the exclusions before the premium. A policy that carves out the exact risk your diligence flagged is an expensive way to feel protected.