Recently, I was speaking with a client about a life insurance policy to protect his family, and during the discussion, he asked about the waiver of premium rider in his life insurance policy. He had never heard of this clause or option, and asked me to explain what a waiver of premium rider did, and what effect it had on his policy.
A waiver of premium rider is actually an option that is available in a life insurance policy that pays the life insurance policy premiums if the insured becomes disabled and unable to make the policy premium payments. The waiver of premium rider usually contains a small waiting period (usually six months) before it kicks in and starts making the insurance policy premium payments. In some cases, the waiver of premium acts retroactively, and will reimburse the insured for the insurance policy premiums paid during the waiting period. In effect, this means that the premiums are paid immediately from the time the disability starts.
There will be some requirements that must be satisfied before the waiver of premium will start paying, but generally, if you are unable to work, it will provide coverage. It is important to note that the disability must be complete, and insured must be unable to perform any type of work. For example, if the insured is able to work part-time, the rider may not pay. The rider will also add some additional cost to the life insurance policy. If the insured has plenty of disability insurance coverage and has included the life insurance policy premium in the estimated coverage needs then they may not need to add this rider to the life insurance policy.
Still, the rider is a cost effective addition to a life insurance policy because it provides a measure of relief in case something catastrophic happens. The cost is negligible considering the potential benefit and protection that it provides.
Tags: Insurance, Life Insurance, riders, waiver of premium
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