What is a Waiver of Premium For Payer Benefit?

A waiver of premium for payer benefit clause in an insurance policy says that the insurance company will not require the insured to pay a fee to maintain the plan under certain conditions. Most commonly, these conditions are the death or disability of the person paying the insurance premiums.

The insurance company may charge a higher premium to include this waiver in the policy to compensate for the additional risks presented with a waiver of premium for payer benefit. The payor is the life insurance company and the payer is the policyholder who pays the bills.

How Waiver Of Premium For Payer Benefit Works

As an example of a waiver of premium for payer benefit, consider if a parent or grandparent purchased a life insurance policy for their child or grandchild. The policy might contain a waiver of premium so that the child would continue to be covered even if the parent or grandparent died or became disabled and was no longer able to pay the premiums.

Key Takeaways

  • The cost for a basic waiver of premium for payer rider is meager, and most policyholders should seriously consider including it in their coverage if not included in their policy.
  • To qualify for a waiver of premium for payer benefit, some companies may mandate the policyholder to meet specific requirements, such as being healthy or being below a certain age.
  • The drawback to this type of insurance rider is that it will probably significantly increase a life insurance premium.

The waiver might only apply until the child reached an age where he or she could be expected to pay the premiums alone, such as age 21. The benefit will also protect the insured’s beneficiaries, who may need the financial benefits from the policy to pay for housing, college, or other living expenses when the insured is gone.

Keep in mind that the waiver of premium for payor benefit will expire, often at age 60 or 65. To understand this and other limitations of this rider, it's essential to read the fine print of a policy. Some waivers may exclude the payment of benefits for death by a specified cause, such as especially hazardous occupations or hobbies.

A waiver of premium for payer benefit prevents a whole (or universal) life insurance policy from lapsing if the policyholder becomes disabled and loses their ability to generate income.

Special Considerations

The waiver of premium for payer benefit may come as a clause included in a life insurance policy, or it may need to be added as a rider. The time to figure out if this policy benefit will need to be added as a rider is when a potential policyholder is discussing coverages with their insurance agent and completing the application.

An insurance company may offer an enhanced waiver of premium for payer rider options. For example, a company might provide a potential policyholder an opportunity to expand the waiver to cover unemployment or possibly skip payments in the event a policyholder is laid off and out of work.