The waiver-of-premium benefit usually applies to life insurance policies. This benefit can help keep your life insurance in force if you are laid up due to injury or illness. If you are disabled, the benefit allows you to stop making payments until you get back to work. The terms of the benefit can vary from policy to policy and between insurance companies. This valuable benefit adds very little to the cost of insurance.
The waiver of premium lets the policy owner stop paying premiums and still retain the life insurance if he cannot work due to disability from injury or illness. In most cases, the waiver kicks in after six months of disability, and at that point, the owner will not be required to make any premium payments for as long as he remains disabled. The waiver clause in the policy details the insurance company's definition of disability. If you become disabled, notify the insurance company and do not stop making your insurance payments until you know the waiver is in effect.
Clause or Rider
The waiver-of-premium benefit may come as a clause included in a life insurance policy or as an added-cost rider that you can have attached to the policy when it is purchased. Riders are additional features or coverage that can be attached to an insurance policy. The time to find out if you need to add a rider is when you discuss the coverages with an insurance agent and complete the application. The cost for the typical waiver-of-premium rider is very low, and serious consideration should be given to adding the benefit if it is not included in the policy.
Amount of Premium Waived
What the waiver of premium covers differs with each life insurance policy type. With both term and whole life policies, the full amount of the premium will be waived if the clause is triggered. However, with a universal or variable life insurance policy, the waiver usually only covers the cost of insurance charges for the policy. These latter two types of insurance are "unbundled," with a portion of your premium going to pay for the life insurance coverage and a portion into the cash or investment value.
Additional Coverage Options
The insurance company may offer enhanced waiver-of-premium rider options. Some companies give you the opportunity to expand the waiver to cover unemployment, or allow you to skip some payments if you are laid off and out of work. Another rider is the waiver of premium for payer. This rider applies if someone other than the person covered by the insurance is paying for the policy. For example, if a parent is paying for life insurance on a child. The payer waiver would apply if the parent died or was disabled, keeping the child's policy paid up and current.
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