What is 'Waiver Of Premium For Disability '

Waiver of premium for disability is a provision in an insurance policy that states the insurance company will not require the insured to pay the premium if the they are seriously injured. Insurance companies can vary in their definition of a disability, and policies can vary on when and for how long they will waive a premium in the event of a disability. Also, insurance companies may charge a higher premium to include this waiver in the policy.

BREAKING DOWN 'Waiver Of Premium For Disability '

Two types of insurance policies that commonly include a waiver of premium for disability are life insurance and disability insurance. The waiver can mean the difference between the insured being able to keep the policy or having to give it up if he or she becomes disabled, is unable to work and no longer has an income. This waiver is particularly important for disability insurance because if the insured had to pay premiums after becoming disabled, they would not be protected against the peril they were trying to insure against.

How Waiver of Premium For Disability Works

Usually, this waiver applies retroactively to the beginning of the disability. If the insured made premium payments while the waiver was in effect, those premiums are usually refunded. Many insureds choose to have this rider attached to their policy because in the event of a disability, it allows the policy to continue functioning normally on all fronts, including the death benefit, dividends and cash values. When the disability ends, the policy owner starts making premium payments again.

Issues can arise if an insurance company denies a life or disability insurance claim based on non-payment of premiums because the insured thought that the waiver of premiums was in effect. How the provision functions varies by contract, and every life insurance policy defines "totally disabled" differently. It is important to speak with an attorney if a claim is denied based on non-payment of premiums or the insurance company declared the decedent not totally disabled as defined in the policy.

Usually, a person is considered totally disabled if he or she can't perform the duties of an occupation for which he or she is qualified by education, training or experience. The disability must be caused by an injury or sickness. For example, if Harry sells cars, his duties include speaking with customers about buying cars. If an injury or illness prevents him from being able to handle this and other related duties, he will usually be considered disabled.

RELATED TERMS
  1. Waiver Of Premium For Payer Benefit ...

    A waiver of premium for payer benefit clause says that an insurance ...
  2. Any-Occupation Policy

    Any-occupation policy is disability insurance where the insured ...
  3. Credit Insurance

    Credit insurance is a type of insurance that pays off one or ...
  4. Disability Insurance Trust Fund

    An account within the Social Security Trust Fund used to pay ...
  5. Concurrent Periods

    A period of time in which more than one injury or disability ...
  6. Waiver Of Restoration Premium

    A clause in an insurance policy that says that the insurance ...
Related Articles
  1. Financial Advisor

    How to Help Clients Who Have Become Disabled

    Disability can strike a client any time. Advisors should make sure clients are adequately insured against this risk and know what benefits are available.
  2. Insurance

    Choosing The Best Disability Insurance

    Social Security benefits can be hard to collect. Find out why you need disability insurance to protect your income, and learn how to choose the right policy for you.
  3. Financial Advisor

    Disability and Business Overhead Coverage for the Self-Employed

    What every small business owner or professional needs to know about individual and business overhead disability income insurance plans.
  4. Insurance

    Group and Individual Disability Insurance: What You Need to Know

    What you need to know about group and individual disability income coverage.
  5. Personal Finance

    CFPs: The Quarterback of a Financial Team Part 1

    In the event of an illness or injury, a CFP can play quarterback in helping you get benefits owed.
  6. Financial Advisor

    How Do Workers' Compensation Benefits Work?

    What you need to know about Workers' Compensation benefits.
  7. Financial Advisor

    How to Manage SS Disability & Retirement Benefits

    Advisors with clients who receive disability benefits can carve out a profitable niche by helping them integrate this income into a financial plan.
  8. Retirement

    Strategies to use life insurance for retirement

    Here's how to incorporate life insurance into a plan to ensure that you and your family have the smoothest possible transition into retirement.
  9. Insurance

    Using Insurance in a Business Succession Plan

    How to use life and disability insurance to help fund a business succession or buyout plan.
  10. Insurance

    Insurance for Millennials

    Four insurance must-haves – and one maybe – for Generation Y
RELATED FAQS
  1. Is there a limit on the amount of disability insurance that I can buy?

    Disability insurance policies are designed to partially replace your income in the event that you become disabled and cannot ... Read Answer >>
  2. What are the maximum Social Security disability benefits?

    The benefit amount for a recipient of Social Security Disability Insurance (SSDI) varies based on average lifetime earnings. Read Answer >>
Hot Definitions
  1. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  2. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  3. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  4. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  6. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
Trading Center