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A waiver of premium benefit covers your life insurance premiums when you're disabled. This type of rider is especially attractive if you work in an occupation that puts you at greater risk of disability. Most individual life insurance policies offer a waiver of premium provision. "Once you are covered under a waiver of premium rider, the typical policy requires a waiting period of six months after you become disabled," says Paul Wetmore, assistant vice president of Life Product Management at MetLife. "You must keep paying your life insurance premiums during that time, but you will be reimbursed for those premiums after the waiting period." If you have a recurring disability, you won't have to undergo the six-month waiting period each time. "If you have a waiver of premium rider, there is no limit to the number of times you can use the rider," says Wetmore. However, if you have a new disability unrelated to the earlier problem, you again will have to wait six months, he says. Most waiver of premium riders are available on life insurance policies issued to policyholders between the ages of 18 and 60. Each insurance company has different requirements, according to Wetmore. Terry Headley, president of Headley Financial Group in Omaha, NE, says that waiver of premium provisions generally terminate at age 65. "The idea is to protect earned income, so if someone is retired, there is no earned income to protect," says Headley. The cost of a waiver of premium benefit depends on the size of the insurance policy, the type of policy, your age and your risk rating. For example, Wetmore says on a term life insurance policy – which has lower premiums than a permanent or whole life policy – the waiver of premium rider might cost 10% to 15% of the total annual premium. On a whole life insurance policy, the waiver of premium rider might cost 3% to 5% of the total annual premium. IN THIS ARTICLE
Challenges for high-risk professionsIf you work in a high-risk profession, it may be a little more challenging and costly to find an insurance company that will sell you a life insurance waiver of premium rider. Headley says insurance companies use occupational ratings to underwrite waiver of premium riders. Some insurance companies use their own ratings system while others use a schedule developed by a state insurance commissioner. If you're in an occupation with a "no" rating, it may be more difficult to get a waiver of premium rider on your life insurance policy. Firefighters, police officers and pilots are among the "high risk" occupations that typically fall into this category. But others on this list might surprise you. They include many professions viewed as relatively risky to insurers because of the greater likelihood that illness or injury may keep you from working. Examples include:
Headley says back pain and back injuries are responsible for many cases of disability leave, so many occupations on the list involve lifting heavy items – or in the case of nurses, moving patients. Other factors also may affect your ability to get a waiver of premium rider. If you're in poor health or enjoy a risky activity such as scuba diving or skydiving, you may not be approved for a waiver or may have to pay a higher premium for the rider. Your age also may play a role in whether you're approved. As we mentioned, most life insurance plans offer a waiver of premium rider, but what you do for a living plays a big role in whether you're eligible for the rider.
If you want to protect the people you love from financial disaster, it's essential that you understand how life insurance works. Life insurance policies pay a death benefit if you pass away due to a covered cause. But your policy must be active when you die for your life insurance beneficiaries to receive any money. And that means you must keep paying insurance premiums to keep your coverage active. Unfortunately, this can be difficult if you become disabled and have limited income. A waiver of premium rider could help you make sure your coverage doesn't lapse if that happens to you. But purchasing this type of additional protection doesn't make sense for everyone so you need to consider the pros and cons carefully. This guide will help you determine if buying a waiver of premium rider from your life insurance company would be a smart money move or not. What is a waiver of premium rider?Life insurance riders are essentially add-ons to your basic insurance coverage. They provide additional protection but come at an added cost. A waiver of premium benefit is a specific type of rider that allows you to avoid losing your insurance coverage if you cannot make your monthly premium payments because you have become disabled. When you develop a qualifying disability, your premiums are waived or are paid for you and your insurance coverage remains intact. Without a waiver of premium rider, you could be faced with a hard choice if you are disabled. If you can't work and can't continue paying insurance premiums, you may have no choice but to stop paying your policy. Sadly, if you are forced to let your coverage lapse, you would no longer have the protection the policy provides and your loved ones would not receive a death benefit if you were to die during that period of time. How a waiver of premium worksIf you want the protection that a waiver of premium rider provides, you'll have to purchase this rider when you buy your initial insurance policy. You're generally not allowed to add this rider onto your coverage later. You can purchase a waiver of premium rider with either a whole life policy or a term life insurance policy. However, you must meet certain insurability criteria to be eligible to buy it. While specific eligibility guidelines are determined by individual insurers, you generally:
Some insurers may also deny you the ability to purchase this rider if you work in an industry or engage in hobbies where there is a high risk of disability. Unfortunately, when you buy this rider, it won't protect you from costs the day you become disabled — there's typically a waiting period of around four to six months. That means if you become disabled, the waiver of premium benefit wouldn't kick in to cover the payment of premiums until your condition has persisted for the length of the waiting period. If your disability lasts for the required minimum length of time and your waiver of premium claim is ultimately approved, you will generally be refunded for the premiums you paid during the waiting time. Still, you'll have to come up with this money upfront to stay covered and prevent the policy from lapsing. What you can expect from waiver of premium rider benefits?A waiver of premium policy typically will kick in and pay your insurance premiums only if you meet a specific definition of disabled. Again, your individual policy language will define what it means to be "disabled" for purposes of this benefit. Some life insurance companies may have a broader definition than others, but as a general rule, you will need to have suffered a “total disability." This is usually defined as being unable to perform some or all of the duties of your occupation or of any occupation for which you are trained. With some policies, specific medical conditions such as becoming blind or losing limbs will automatically mean you qualify as totally disabled. Your policy will also specify how long the waiver of premium provision remains in effect. Usually, your insurance costs will be covered for as long as you remain continually disabled and up until you reach a certain age, such as age 60 or 65. This could potentially be for the entire remainder of the time you have insurance coverage, if you have a term life policy. If you are older or are near the end of your coverage term, the insurer may determine your condition has permanently disabled you for life and will waive all future premiums until aged 60 or 65 or until your policy term ends. If you are younger, the insurer may want to conduct periodic reviews to ensure you still meet the definition of disabled. If you become disabled multiple times during your term of coverage, you can usually make use of this benefit multiple times. If your cause of the disability is the same each time, you may not need to fulfill separate waiting periods before your waiver of premium coverage becomes active. How to file a waiver of premium claimIndividual insurers establish their own claims process so you will need to check your policy to determine how you should file a waiver of premium claim. In general, you will need to submit:
Depending on your insurer, you may be able to file a claim form online and upload your documents or you may have to submit your application via mail. Your insurance company will then review your documents and provide a decision, typically within a few weeks. Should you get a waiver of premium rider?A waiver of premium rider can offer continued protection for your loved ones if you become disabled and are unable to pay for your life insurance expenses. However, there are some pros and cons to purchasing this type of insurance rider. Here are the biggest advantages:
And here are the biggest downsides:
If you can't afford or qualify for a standard disability insurance policy, this rider may still be right for you. Or if you want the coverage a waiver of premium provides in addition to a standalone disability insurance policy so you don't have to worry about paying life insurance premiums from your disability checks, this rider may still be right for you. Just remember to consider the costs versus the risk that you'll become disabled during your term of coverage so you can make a fully informed choice. And be sure to compare your insurance options carefully to find an insurer offering the most affordable premiums for the comprehensive coverage you need, including for your waiver of premium rider. You could start by checking out our list of the best life insurance companies. FAQs
Purchasing a waiver of premium rider is a good idea if you are concerned about your ability to maintain your life insurance coverage in the event you become disabled. A waiver of premium rider covers the premium costs so your life insurance policy doesn't lapse due to non-payment. You may wish to explore alternatives such as a disability insurance policy before you purchase a waiver of premium rider. A disability policy would provide income to pay for many of your bills if you become disabled, including life insurance premiums. A waiver of premium rider doesn't help cover any other costs, but instead simply ensures a loss of income due to disability doesn't make it impossible to remain insured. It is always a good idea to compare coverage and costs when shopping for any kind of insurance.
The cost of a waiver of premium rider varies depending on many factors including the insurance company providing your policy, your age and health status, and the type of life insurance you have (term or whole life). The greater the likelihood that you will become disabled while your insurance coverage is in effect, as determined by the insurance company, then the higher the cost of the waiver of premium rider will be.
When you purchase a waiver of premium rider with your life insurance, you will be informed of the specific waiting period before the premium protection kicks in. The specific length of the waiting period varies by insurer. For most insurers, the waiting period is four to six months. That means your insurer will not waive the insurance premiums for the first four to six months after you become disabled. If you remain disabled for the long term and the waiting period passes, you may be able to obtain a refund of the premiums paid during your waiting period. A waiver of premium rider could be an important add-on to a life insurance policy if you are afraid disability will prevent you from being able to pay insurance premiums. However, this type of rider offers only limited protection as your disability must last for several months before it kicks in. This rider may also be relatively expensive for the coverage it provides. You also need to consider whether a disability insurance policy that replaces part of your income might make more sense both in terms of coverage and in terms of cost. This alternative could do more than just allow you to pay for life insurance premiums if you become unable to work due to a medical condition. By considering all your options as you sit down to do your estate planning, you can ensure you and your loved ones have the insurance coverage you need and the protection you deserve.
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What is the waiting period on a waiver of premium rider in life insurance policy?
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