Waiver of premium rider
| Waiver of premium rider |
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| 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
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
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
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
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
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
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.
- For example, a Waiver of Premium Rider may waive the need to pay premiums on a life insurance policy in the event that the policyholder becomes disabled and is unable to work. The policyholder can continue to maintain their life insurance coverage without having to make any payments, provided certain terms and conditions are met.
- Another example of waiver of premium rider is in the event of a critical illness. If the policyholder is diagnosed with a critical illness, such as cancer or a heart attack, the Waiver of Premium Rider would waive the need to pay premiums on the policy. This would allow the policyholder to maintain their coverage without having to make any payments.
- A third example of waiver of premium rider is in the event of death. If the policyholder passes away, the Waiver of Premium Rider would waive the need to pay premiums on the policy. This would allow the policyholder's beneficiaries to continue to maintain the life insurance coverage without having to make any payments.
The Waiver of Premium Rider is an optional benefit on many term and permanent life insurance policies, and is designed to waive the premium payments in the event of disability or unemployment. However, there are certain limitations associated with this rider. These limitations include:
- The rider is only available to policyholders under a certain age, typically between 18-60 years old.
- The policyholder must be totally disabled or unemployed for a certain period of time in order for the waiver to take effect.
- The waiver of premium is not available for any pre-existing health conditions or chronic illnesses.
- Waiver of premium does not cover any additional riders such as accidental death and dismemberment, critical illness, or other riders.
- The waiver of premium does not cover any premium increases due to changes in age or health.
- Waiver of premium may not be available in all states.
- If the policyholder chooses to convert their term life insurance policy to a permanent policy, the waiver of premium rider may not be available on the new policy.
A Waiver of Premium Rider is an optional benefit on many term and permanent life insurance policies. It may also be available on other forms of insurance coverage. Other approaches related to Waiver of Premium Rider include:
- Accelerated Death Benefit Rider - This rider allows policyholders to access a portion of their death benefit while they are still alive in the case of a terminal illness.
- Guaranteed Insurability Rider - This rider allows policyholders to purchase additional insurance coverage without having to undergo a medical exam.
- Return of Premium Rider - This rider allows policyholders to receive a full or partial refund of their premiums if their policy is canceled or expires before their death.
In summary, a Waiver of Premium Rider is an optional benefit on many term and permanent life insurance policies that can provide additional coverage and other benefits. There are several other riders that may be available with life insurance policies such as Accelerated Death Benefit, Guaranteed Insurability, and Return of Premium Riders.
Footnotes
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References
- Belth.J.M.,(2011) Life Insurance A Consumer's Handbook , Indiana University Press, p 29
- Boger.P.,(2015) Life and Health , Atlantic Publishing Group,p 165
- Price.J.R.,Donaldson.S.A.,(2012) Price on Contemporary Estate Planning ,State University of New York Press, p 21.
Author: Bohdan Zaporozhchenko
