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 for their life insurance premium if they are concerned about staying in financial health if they are injured on the job, for example.
- 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.
Watch Now: All About Waiver of Premium Riders
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 raises the cost of a life insurance policy.
Most waiver of premium riders contain a waiting period during which you cannot claim of benefits. If you are physically impaired or hurt during the waiting period, you may receive a full refund of paid premiums. Without a waiting period, the insurer company assumes much more risk losses.
Applicants with pre-existing disabilities can't qualify for benefits from a waiver of premium rider. Placing a pre-existing limitation avoids the possibility of writing a policy that would not yield premium payments from the high-risk applicants.
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 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.
Waiver of premium riders may not be available in all states.
Waiver of Premium Claim Requirements
Requirements for filing a claim vary, but they 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 signficant benefit is the continued protection of the insurance policy.
How much does a waiver of premium rider cost?
A waiver of premium rider's cost will depend on several factors, including your age, health and amount of coverage. For example, you might pay about $3 a month if you're a 35-year-old man with a 20-year, $500,000 term life insurance policy for $21.05 a month.
What are some restrictions?
Waiver of premium riders may contain several restrictions such as you may not have any pre-existing conditions or physical impairments. You may also face health and age restrictions. Finally, a waiver of premium rider may not be available in your state.
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.
The Bottom Line
A waiver of premium policy maintains your life insurance policy if you become unable to work, so that you can use your cash flow for critical needs. With whole life insurance policies, it will allow you cash component to continue to grow. In these ways, waiver of premium riders can provide an important financial asset for many people. Consider consulting with a financial advisor to determine whether a waiver of premium policy is right for your situation.