Wondering what is waiver of premium rider on life insurance policy? Here we cover exactly what you need to know and if it’s right for you.
Protecting your loved ones should be a top priority. This is why securing the right coverage is important when having family members who rely on your income. Life insurance coverage is a financial safety net for if something happens to you.
Some of you may even be wondering how you’ll pay your life insurance premiums if you’re not able to earn an income. What will happen to your coverage then?
At this time you should consider the waiver of premium rider. With this, premium payments waive if you become very ill or disabled. It’ll protect your family’s financial future if you no longer can work.
It could be a great addition to your life insurance policy. But first, you want to be sure it’s right for you. So, what is a waiver of premium rider on a life insurance policy?
What’s 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 disabled. It is also called a waiver of premium for disability. It helps prevent your life insurance coverage from becoming invalid if you’re not able to continue the payments.
If you work in an occupation where you’re at a high risk of becoming disabled, then this type of rider is perfect for you.
If you’re seriously injured or too ill to work then the rider covers your premiums. Although the waiver does cost a bit more each month, it could save you money in the long run. Instead of paying your premiums to keep your life insurance policy active, you could put that money towards needed healthcare and living expenses.
The waiver of premium on life insurance policy keeps your protection right in place. This even goes for if you have disability income insurance but become disabled. The benefits from the waiver give you more income once the benefits of the disability policy end.
The waiver of premium is a unique financial asset to have. Once you are no longer disabled and are able to work again, premiums or charges will no longer be waived. It’ll be your responsibility to continue to make those payments to keep your policy in force.
Qualifications are based on your health, current age, and other factors depending on the chosen life insurance company.
How Does it Work?
Usually, the waiver of premium on a life insurance policy has a waiting period. During this period, you cannot claim the benefits. If you have a disability during that time, you’ll get a refund of the previously made premium payments.
Those with pre-existing disabilities cannot receive the benefits. This helps to avoid the possibility of a written policy that couldn’t see premium payments from high-risk applicants.
The payments withdrarw from the death benefit. So you no longer need to risk surrendering your life insurance policy, and you’ll only slightly decrease your death benefit.
Other life insurance companies offer the rider for unemployment. That’s where you can keep your life insurance intact without making payments once you’re out of work.
What are the Benefits?
Benefits vary by the issuing company. For the waiver to go into effect, you must be disabled for a certain time period. Roughly one in four employed 20-year-olds today will develop a disability before they retire, according to the Council for Disability Awareness.
In this situation, adding the waiver of premium on a life insurance policy will help you obtain your coverage. It’ll help you maintain your cash values. If a person becomes disabled or injured and is unable to work, he will likely have to cut his monthly, quarterly, and annual expenses.
Having to choose between which expenses you have to cut can be quite stressful. With this rider, you no longer have to decide on what to cut. It’s important to know that certain waiver of premium riders require different things from their policyholders.
This is in order for them to get the benefit of the rider. You should speak with your insurance agent about which riders you might benefit from. You can only buy this rider when you take out a policy and must qualify for it before buying it.
How Much Does it Cost?
The waiver of premium rider is a flat fee added to your premium payments and remains the same throughout your policy. It will depend on a risk assessment based on your physical health and age. The assessment is necessary because the rider is made to cover an unpredicted disability, not a disability that’s highly likely during the purchase time.
Through the underwriting process, they’ll determine the costs for your monthly insurance and the rider together. The rider is fairly affordable from month to month. It may cost you between 15 and 25 percent of your monthly premium.
You must keep in mind that insurers determine the right cost for the rider and coverage based on your health, age, occupation, and activities.
Not only is the waiver of premium disability insurance for your life insurance, but it also ensures you peace of mind. The rider slightly increases the cost of your life insurance now, but it can ensure financial protection later.
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