The waiver of premium rider – as the name indicates – is a provision under which the insurance provider waives off your premium payments in case you are disabled due to an illness or injury and unable to work as a result.
It enhances the scope of protection offered by your policy, offers additional benefits that are usually not included in your life insurance coverage, and allows you to customize your policy to suit your specific needs.
One of the most common riders offered by insurance providers is the waiver of premium rider. In this article, we take an in-depth look at its features and discuss the benefits of adding it to your life insurance policy.
The answer to this question depends on your financial situation and needs.
Adding a waiver of premium rider to your life insurance coverage is a good idea if you are from a low-income or middle-income household and if you happen to be the breadwinner of the family.
If you become disabled and rendered unable to work, you might find it difficult to keep up with the premium payments, especially in the absence of a second income source. If you fail to pay the premiums, your policy might lapse, leaving your family unprotected in the event of your untimely death.
With a waiver of premium rider in place, you do not have to worry about such a possibility as you are assured of life insurance coverage even if you do not pay the premiums – as long as you are disabled.
It gives you a sense of security, as you know that your family’s financial needs are covered if something were to happen to you.
If you suffer an injury or develop an illness, as a result of which you are disabled (at least for a period of six months), your policy premium will be waived off by the insurer.
Your policy will stay in effect till the end of the term period, even if you do not make any further payments.
If you become permanently disabled, you are not required to pay your policy premiums until the end of the term period. In case of temporary disability, you can utilize the benefits of the waiver as long as you are disabled.
Once you are fully recovered and start working again, you need to start paying the premiums again. The terms and conditions, however, might differ from one insurer to another.
It should be noted that the definition of the term ‘disability’ might differ from one insurance company to another, as each company has its own set of criteria which you need to meet in order to be considered disabled and become eligible for the waiver of premium rider.
The broadest definition of disability, which is accepted by most insurers, is a condition wherein you are physically unable to perform your professional duties and engage in the occupation that you were previously employed in.
A vast majority of insurance providers require you to be under a certain age (could be anywhere from 55 to 65, depending on the company) in order to qualify for the waiver.
If you become disabled when you are in your 50’s, you can utilize the benefits of the waiver until you reach the age limit set by the company, after which you are required to pay the premiums until the policy expires.
If you become disabled after the age of 65, you will not qualify for the rider at all, even if your life insurance policy is still in effect.
There are two reasons behind the age limit for the waiver of premium rider. They are:
There is a waiting period involved, which can be anywhere from six months to one year after the policy is issued, depending on the insurance company. If you become disabled right after the policy is issued, you have to pay the premiums until the waiting period is over.
From the seventh month, the insurance company will not only waive off your premium payments, but also refund the amount you paid during the waiting period.
You are required to file a disability claim with your insurer in order to avail the benefits under the waiver of premium rider.
You are also required to submit relevant medical records to prove that you are indeed disabled and not in a position to work. Once you qualify and the rider kicks in, you do not have to pay the policy premium.
The life insurance company might ask you to submit proof of disability from time to time to make sure that you are still disabled and eligible to receive the benefits under the waiver.
Once qualified, you can continue to take advantage of the benefits of the waiver as long as your disability persists.
Once you recover and start working again, you can start paying the life insurance premiums. You are allowed to file a claim for the waiver more than once with your insurer, as long as you meet their eligibility criteria.
The cost of the rider is usually determined by the insurer based on several factors – the most important of which being your age, health condition, and your occupation.
If you are older than the upper limit set by the company (as mentioned above), the company might not offer you the rider at all.
If you are at high risk of developing a disability, either due to a genetic predisposition or due to the nature of your occupation or lifestyle, you could be declined or charged a higher rate by the insurer.
In most cases, the cost of the rider is likely to be 10% to 25% of your insurance premium (in case of a term life insurance policy).