Waiver of Premium Rider

What Is a Waiver of Premium Rider?

A waiver of premium rider is an insurance policy clause that waives premium payments if the policyholder becomes critically ill, seriously injured, or physically impaired. Other stipulations may apply, such as meeting specific health and age requirements. Policyholders may want to purchase a waiver if they are concerned about making ends meet if they are injured on the job, for example.

Key Takeaways

  • A waiver of premium rider is an optional insurance policy clause that waives insurance premium payments if the policyholder becomes critically ill or physically impaired.
  • To buy a waiver of premium rider, you may need to meet certain age and health requirements.
  • The rider is added to an insurance policy for an additional fee.
  • You can't get a waiver of premium rider if you're physically impaired or have a pre-existing condition.

How a Waiver of Premium Rider Works

Policyholders often add the rider as an optional or supplemental benefit to a life insurance policy. It's available only when a policy is issued, and costs vary per insurer and applicant. Insurance companies typically add the rider fee to the premium or charge an upfront fee. This fee will raise the cost of a life insurance policy, which may be something to consider before purchasing.

Most waiver of premium riders contain a waiting period during which there can be no claim of benefits. If physically impaired or hurt during the waiting period, the policyholder may receive a full refund of paid premiums. Without a waiting period, the insurer’s assumed risk increases substantially, and devastating losses could result.

Applicants with pre-existing disabilities aren't permitted to obtain benefits. Placing a pre-existing limitation avoids the possibility of writing a policy that would not see premium payments from the high-risk applicants.

Waivers can be added (if available) to term, whole, and universal life insurance policies.

Waiver of Premium Rider Benefits 

Physical impairment, critical illness, and severe injury are the most common qualifying conditions under the waiver of premium rider. Terms, conditions, and benefits may vary by insurance product and issuing company. A policyholder must be disabled for a specific period (e.g., six consecutive months) before the premiums waiver goes into effect.

The waiver is also useful if an injury or illness prevents the policyholder from working in a traditional capacity. The most commonly considered diseases are those that require significant hospital stays resulting in the policyholder being unable to work. Some riders stipulate that the condition need only adversely affect the policyholder's occupation in which they received training and worked.

Waiver of premium riders may not be available in all states.

Waiver of Premium Claim Requirements

Requirements for filing a claim vary, but typically include a physician's statement and notice from the Social Security Administration (SSA) confirming the physical impairment or disability. The applicant could then submit a completed claim form. The waiver of premiums allows the redirection of limited personal funds to palliative care, personal finances, and living expenses. However, the most substantial benefit is the continued protection of the insurance policy.

How much does a waiver of premium rider cost?

It'll cost 15% to 25% of a term life insurance policy's monthly premium, according to Haven Life. That would be just under $3 a month if you're a 35 year old man buying a 20-year, $500,000 policy for $21.05 a month.

What are some restrictions?

For starters, the waiver isn't available in all states. Also, those with a physical impairment or those with a pre-existing condition are ineligible. Health and age requirements may apply.


What are the claim requirements?

Typically to file a claim a holder must submit a physician's statement and notice from the Social Security Administration (SSA) confirming the disability. The waiver of premiums allows the redirection of limited personal funds to palliative care, personal finances, and living expenses. 

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. New York State Department of Financial Services. "Optional Riders and Supplemental Benefits." Accessed Nov. 14, 2021.

     

  2. Nationwide. “Premium Waiver Rider.” Accessed Nov. 14, 2021.

     

  3. Progressive. "Waiver of Premium Disability Rider." Accessed Nov. 14, 2021.

  4. Haven Life. “5 Things You Should Know About the Waiver of Premium Rider.” Accessed Nov. 14, 2021.

  5. HavenLife.com. "Waiver of Premium Rider." Accessed Nov. 14, 2021.