Waiver of premium rider

Waiver of premium rider
See also


A waiver of Premium Rider is an optional benefit on many term life insurance policies, and may also be available on permanent forms of insurance coverage[1].

Characteristics[edit]

The waiver of premium rider will provide a benefit only if the insured person becomes totally disabled. If a total disability occurs, the remaining premium charges will no longer be required to be paid, but the policy will remain in force for the length of term that the policy was written for. Besides term policies, there may also be waiver of premium riders added on whole life insurance, universal life insurance, and variable universal life insurance[2].

Value of Waiver Premium Rider[edit]

This rider is particularly popular and valuable to people because a total disability will inevitably decrease a person’s income. That means that it is more difficult to pay bills such as life insurance. It also makes it much more difficult to save money. The waiver of premium rider not only eases the burden of paying life insurance bills, but it prevents the life insurance policy from lapsing. When people have a difficult time paying bills, they often will terminate their life insurance quickly as a way to make spending cuts[3].

Benefits of Waiver Premium Rider[edit]

The waiver is 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. 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. The most substantial benefit is the continued protection of the insurance policy[4].

Price of Waiver Premium Rider[edit]

The cost and availability of the waiver of premium rider will depend upon a risk assessment based on your age and your physical health. This risk assessment is necessary because a waiver of premium rider is meant to cover an unforeseen disability, not a disability that appears highly likely at the time of purchase. Fortunately, the waiver of premium for disability is fairly affordable for most policyholders from month to month. On a term life insurance policy, the rider might cost between 15 and 25 percent of your monthly premium [5].

Period of Waiver Premium Rider[edit]

The waiver of premium rider allows for your premiums to be waived during your disability usually up to age 65. The benefit terminates when the policy terminates. If you have a 10 year term policy for example...the waiver of premium will only last up to the end of the 10 year period or to age 65, whichever is sooner[6].

Requirements of Waiver Premium Rider[edit]

Usually a company will need a few items for a claim, but the requirements can vary between companies. The items most commonly needed are[7]:

  • A signed statement from a doctor stating that the insured person has become totally disabled, and the note must specify when the disability occurred.
  • A letter from the Social Security Administration stating that the insured person is totally disabled. This may often be used in lieu of a doctor’s statement.
  • A rider claim form provided by the insurance company which which the owner and insured person must sign, indicating that they would like to exercise the waiver.
  • A signed letter of instruction from the policy owner, indicating their intent to exercise the rider. This may sometimes be used in lieu of the claim form.

Footnotes[edit]

  1. (P.Boger.,2015,p.165)
  2. (J.M.Belth.,2011,p.29)
  3. (J.R.Price.,S.A.Donaldson.,2012,p.21)
  4. (J.R.Price.,S.A.Donaldson.,2012,p.20)
  5. (J.R.Price.,S.A.Donaldson.,2012,p.18)
  6. (J.M.Belth.,2011,p.29)
  7. (P.Boger.,2015,p.164)

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References[edit]

Author: Bohdan Zaporozhchenko